The USD traded to the stronger side of its range against both the EUR and GBP in another day of caution throughout the global marketplace. Wall Street finished the day in negative territory and its recent spate of bad results is obviously taking a toll on investor sentiment. The ADP Non Farm Employment Change report was published yesterday and turned in a disappointing gain of only 13K compared to the estimated addition of 59K. The Chicago PMI was also brought forth and offered a flat reading of 59.1. In essence there were no silver linings to be found among the gloom surrounding the economic environment. Having said this, the large degree of caution yesterday may have produced the opportunity to trade ranges among various currencies. Today the weekly Unemployment Claims, the ISM Manufacturing PMI, and Pending Home Sales will all be presented.
The three publications will serve as a good precursor towards tomorrow’s huge day, when the government Non Farm Employment Change figures are due. The weakness in the ADP report yesterday was certainly enough to keep the lingering discontent among certain investors strong. Government officials have been keen to keep a bright outlook on the economy and the U.S. Congress got into the act yesterday as they passed their new financial regulations bill. Critics however are pointing out their beliefs that many of the new rules being proposed are based on poor reasoning by the government. One thing is clear, economic data from the U.S. has been more than lackluster recently and today’s and tomorrow’s outcome will go a long way in creating further tension or easing it. The States continues to be hampered by a poor housing market and a less than promising employment situation and until these two crucial points are fixed it stands to reason that a full recovery will be tough to attain. The USD continues to foster a safe haven sentiment and if more difficulties become apparent for the U.S. and global economy, it stands to reason that the greenback will find its backers.
The EUR continued sputter on Wednesday as it traded to the lower part of its range versus the USD. The Single Currency however continues to hold itself above the lowest realms of its recent downward slope and the question is if this can continue. CPI Flash Estimates from the E.U. underscored that deflation - not inflation – is the real danger. Today Final Manufacturing PMI figures will be presented and the result is expected to match the previous reading of 55.6. Also, German Retail Sales numbers will be brought and are expecting a slight gain. Spain was again in the news yesterday, this time as Moody’s said it is considering a downgrade of the Spanish debt. An interesting argument is developing between Europe and the United States regarding ‘austerity versus stimulus’, this as Europe has basically been forced into a cost cutting mechanism and the States continues to express its belief in spending. The prospects for growth are not particularly good for either economic giant presently in many investor eyes and traders are left to sift through the data. The EUR has performed in a poor trend for months and going into the final two days of trading this week it will likely face a test regarding risk appetite.
The Sterling traded lower on Wednesday as it was not able to hold onto its gains made over the previous trading sessions. The GBP now finds itself in a position that will test the fortitude of those who feel inclined to participate in range trading. The Nationwide HPI disappointed investors yesterday with an outcome of 0.1%. Today the Manufacturing PMI will be released and the reading is expected to be 57.6, which would be slightly below the previous month’s report. The U.K. is working under the shadows of a EUR centric storm and questions about its own prospects for sustaining growth. The U.K. government has taken strong austerity measures in order to counter what was growing debt. Sterling reacted favorably to the government pronouncements last week, but the last couple of days have produced lackluster results. Going into today’s trading session, traders will be keen to see the Manufacturing PMI data and weigh it against their existing sentiment.
The JPY has continued to gain against the USD and the Yen now finds itself in the stronger parts of its range versus the major currencies. Japanese export companies will certainly not be happy with the value of the JPY, but there is little that they can do about this - as safe haven traders pour into the currency as risk adverse momentum continues to grow. Asian bourses mirrored their global counterparts the past week and have produced negative results. The JPY must be monitored carefully as it approaches the strongest parts of its range versus the USD.
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