ECB, Jobless Numbers, & Risk

Wednesday provided traders with a mixed day as the broad markets traded in ranges and finished nearly where they started. The USD picked up a little ground versus the EUR, but its move was not huge taken into the context that the EUR has performed so well the past few weeks. Today could be a big day of news and it will then look towards data. This will occur as the ECB holds their monetary policy press conference. The ECB is very unlikely to alter their current interest rate, even though President Trichet warned about inflation in Europe last month. What investors will look at carefully today is the tone of Trichet’s comments and their interpretation of his remarks which will likely touch upon the Sovereign Debt situation,  Financial Instruments which are being introduced, and a Rescue Plan for the Euro Zone if weaker nations should fail to meet their own needs.

Topping this off is the notion that the USD has traded weaker against the EUR and GBP, as investors have shown a keen taste for equities. Although Wall Street turned in a mixed affair on Wednesday, the major indexes remain at two and half year highs. And with this said jobless data will start to be looked at carefully, although its impact is hard to judge. Yesterday the ADP Non Farm Employment Change numbers came in better than expected, but the previous month’s total was revised downward. Today the weekly Unemployment Claims will be published and a number of 420k is expected. All of this is leading up to tomorrow’s official Unemployment Rate and Non Farm Employment Change numbers and investors will be looking for an improvement. If the jobless numbers fail to deliver good news the question is what will happen to risk sentiment.

The European Central Bank monetary policy meeting and press conference will be a key for the EUR today and this will likely weigh on its nearby counterpart the GBP. The Sterling has done remarkably well the past few weeks as it has enjoyed renewed backing under a EUR centric mode. Taking into account that the U.K. turned in a lackluster GDP report recently and has had mixed HPI data, the GBP continues to hold its ground and finds itself near higher values. The Sterling has been steady and if no surprises come, it may continue to do so.

Risk appetite as mentioned everyday for the past week has shown strength even as clouds lurk on the horizon which could bring a change. The political crisis in the Middle East continues to take place in Egypt and what will happen long term is unknown. The jobless situation and housing sectors in the United States remain vulnerable. The Sovereign Debt situation for Greece, Ireland, and Portugal remain difficult as their growth prospects remain limited. Japan is facing a critical test of its staggering debt sums. Thus, while investors seemingly flock into equities internationally and drive up emerging market currencies and worldwide commodity prices, many questions still exists.

The JPY traded in range along with the AUD on Wednesday. Asian markets are seeing lackluster volume because of the holidays. Australia was fortunate in many respects yesterday as the large cyclonic system reached ground in a weaker state than was anticipated. The price of Gold languished once again yesterday and its consolidation must be looked at carefully and the question is which direction it will take up when this tight range breaks. The AUD remains strong and it remains an interesting trade.