The U.S. dollar sank against major currencies on Friday and gold prices jumped to a six-month high as anemic American jobs growth fueled investor bets that the Federal Reserve will launch another round of monetary stimulus for the world's biggest economy, perhaps as soon as next week.
Yields on safe-haven U.S. Treasuries slumped on the disappointing August jobs data, while yields on Spanish and Italian government debt extended their slide to multi-month lows after the European Central Bank on Thursday announced plans to combat the region's three-year-old debt crisis by buying sovereign bonds.
The prospects for ECB action supported the euro early in the session, and the currency extended its gains after the U.S. Labor Department reported nonfarm payrolls increased by 96,000 in August, well below forecasts for 125,000 new jobs.
The Federal Reserve starts a two-day policy meeting on Wednesday, and markets will keenly await the U.S. central bank's statement issued on Thursday and a media briefing by Chairman Ben Bernanke.
"This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week," said Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.
"QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do?"
Read more: http://www.reuters.com/article/2012/09/07/us-markets-global-idUSBRE86F00620120907
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