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Poor Data From U.S. Disappoints

Caution and tentative trading came back into the broad markets swiftly on Wednesday as economic data from the U.S. managed once again to emphasize that not all is well. The USD gained on the EUR and GBP after the Building Permits and Housing Starts both proved negative. The gains by the Greenback were not accomplished with much volatility, but there is no denying that risk appetite took a hit and investors promptly began to express weary trading on Wall Street too. The Building Permits outcome was .57 million compared to the anticipated figure of .63 million and the Housing Starts numbers were equally disappointing. Crude Oil Inventories also showed an increase, perhaps indicating that even though Americans are driving in their historically high usage months that demand is not significant. Today the States will release weekly Unemployment Claims and the Philly Fed Manufacturing Index.

Although risk appetite did raise its head earlier, it does appear that the bad data yesterday combined with previously discouraging retail and jobless reports put a dent into sentiment. The Fed report from Philadelphia and the Unemployment numbers today could be enough to cause volatility if they do not provide better outlooks – and it should be noted that both publications are anticipated to be rather flat. Meaning that Wall Street could use any additional bad news today to trade lower and the USD may find investors grasping for safe havens. Tomorrow there will be a lack of economic news from the States and this means that today is likely to be heavily influenced by the data on the calendar and the prospects for a robust recovery. Having seen rather lackluster releases come from the U.S. the past two weeks, investors could not be faulted for thinking that negative news may highlight the day.

Economic data from Europe was rather light and the EUR traded under the gyrations of risk sentiment. CPI releases from the E.U. proved lackluster, demonstrating once again that inflation is not a predominant theme in the current environment. Europe continues to demonstrate that its prospects for a strong recovery will remain a difficult task. However, the EUR lost ground to the USD probably due to a decrease in risk appetite coming from dollar centric developments because of poor data across the ocean. The E.U. will be holding another crisis summit in Brussels today to discuss the Sovereign Debt issues and austerity measures that its nations are being asked to consider. While investors have shown a certain degree of comfort in recent days with the EUR and allowed it to find stability there should be little doubt that the wrong turn of a card could cause it to stutter step again. The EUR enjoyed a few steady days of sunshine, but traders will have to watch for risk adverse clouds.

The Sterling turned in a rather flat trading session while losing a bit of ground to the USD on faltering sentiment. Today will be a big day of data from the U.K. with Retail Sales and CBI Industrial Order Expectations. Both sets of numbers will be watched by investors with the knowledge that recent publications from the U.K. have been at best a mixed bag. There is plenty of talk that the government is going to revise existing growth expectations downward in the coming weeks and because of this ‘the market’ has been braced for bad news. The GBP was able to gain earlier this week with increased risk sentiment, but this may have been a short term move within a trend that has put the Sterling under pressure.

The consolidated range that the JPY and USD has been undertaking for months continues. Asian bourses found themselves in weaker territory on the heels of less than promising data from the U.S. yesterday. With important data ready to come from the States today and Wall Street showing signs of nervousness it would not be surprising to see risk adverse trading increase these next two days of trading.

Disclosure: No Positions