The USD lost ground to the EUR on Wednesday as equity markets bounced higher and traders took advantage. There was no major economic data released from the U.S. yesterday and with a certain amount of stability being shown it appears market participants were willing to take positions that allowed for a higher degree of risk. Today weekly Unemployment Claims will be published and a number of 461K is estimated. The anticipated jobless number today is expected to be slightly better than last week’s result. While there has not been much in the way of data recently, the few numbers that have been published have proven disappointing. Tomorrow will be another quiet day of releases, thus today’s Unemployment Claims may prove noteworthy if any surprises come about.
The USD has been taken to the weaker side of its range against the EUR in trading and it has not shown the ability to push back. The question is how long this type of momentum will continue as the market tries to decipher ‘fair value’ with so many long term economic concerns hovering over the global economy. The broad markets turned hectic yesterday and the S&P index had its best performance in nearly a month. Commodity prices also bounced higher after several tough days of downward pressure. Crude Oil Inventories will be released today, but traders are unlikely to be moved too much by its outcome while relying more on the power of its current ranges. The USD has shown that it can be pushed lower against the EUR & GBP and traders who have gone short the greenback have found plenty of opportunity within the short term. If risk appetite is strong enough to stay around the next couple of days, the USD could be tested further.
The EUR gained strongly against the USD on Wednesday on a day without any major surprises from economic data. Today the ECB will hold it monetary policy meeting. It is clear that there will be nothing done regarding interest rates from the ECB, but what investors will be keen to monitor are the comments made by President Trichet at his press conference. Trichet has spoken a couple of times this week so it stands to reason that he will express his rather optimistic yet cautious remarks again for market consumption. The Final GDP figures were released yesterday for the E.U. and they met expectations with an outcome of 0.2%. Today the German Industrial Production numbers will be released and carry an estimate of 0.8%. The crux of the matter for investors though will continue to be ‘the management’ of the financial crisis that embroils Europe via the ECB. Also in the background are news leaks regarding the ‘stress test’ of banks in the E.U., and there is the possibility that President Trichet may get his chance to speak about the subject today. The EUR has done well this week on heightened risk appetite and the question is how long it will last.
The Sterling performed well on Wednesday as it continued to sail smoothly in the midst of austerity ‘merriment’ and better EUR centric sentiment (read stability). There were no releases of significant data from the U.K. yesterday, but this changes today as the BoE holds their monetary policy meeting and the release of the Halifax HPI and Manufacturing Production numbers are all on schedule. While the euphoria of the U.K. government’s tough austerity measures has buoyed the GBP, there remains a dubious economic cloud lurking. Today’s data could be enough to alter sentiment if the reports prove negative. The BoE is expected to stay steady regarding its monetary policy. The Sterling has garnered favorable trading the past couple of weeks and it will provide opportunities to test its range again today.
The JPY gave back some of its gains on Wednesday as risk appetite within the Asian bourses created some breathing room and allowed the Yen to weaken against the USD. Safe haven trading slackened as equities gained globally. It will prove more than interesting the next two days, before closing out the week, to see if yesterday’s trading can prove more than a one day bounce.
Disclosure: No Positions