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US Unemployment Claims to Add to Risk Appetite

By Greg Holden

Global employment figures and consumer confidence appear to be on the rise these past few weeks. Investors appear to be closing out their short positions on the higher yielding currencies in preparation for a shift in their portfolios. If risk appetite is shifting favorably, we could see the employment data from the world's large economies carrying a significant impact on outlook.

Tomorrow's unemployment claims report from the United States comes at a crucial moment for forex traders. Decreases in unemployment appear to be coinciding nicely with boosts in consumer confidence and rises in retail sales. These results are no coincidence, however, as they fall in line nicely with economic recovery.

The American job sector has seen some improvement lately, with ADP and NFP reports from last month showing significant growth in both the public and private sector at year-end. Tomorrow's weekly Unemployment Claims figure may also show a decline in applications for unemployment insurance by US citizens, connecting the American market with a similar occurence in Britain just this morning.

The US dollar's sudden weakness over the past several days was connected with short-coverings on European and Pacific currencies by Asian markets. Boosted optimism over the weekend regarding European growth targets fed the EUR rally as well. A rise in risk appetite from positive US employment figures tomorrow could have the effect of pushing down on the greenback from an increase in demand for higher yielding assets.

Traders may be looking to short the USD tomorrow should the Unemployment Claims report come out positive due to a rise in risk appetite.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.