Mixed Data Abounds

02-09-2010

USD

The markets showed just how divergent they can be on Wednesday. Wall Street finished the day with large gains, supposedly based on the positive numbers coming from the ISM Manufacturing PMI. The USD traded weaker against the EUR before this data had come out however, and the greenback managed to still gain against the GBP. Also flying in the face of the better than expected Manufacturing report was a worse than expected ADP Non Farm Employment Change. In other words yesterday’s gains on Wall Street must be looked at with suspicion. Today the weekly Unemployment Claims will be released and a result of 476k is the estimate, which would be worse than last week’s outcome. While optimists certainly had something to grasp onto yesterday it will prove more than interesting to see if they can stay afloat before going into the weekend.

Traders have to take into consideration that the U.S. will celebrate Labor Day this coming Monday and that their short term positions could face volatility. Also it should be taken into account that Pending Home Sales and Factory Orders data will come from the U.S. today and this could provide investors with a whirlwind of figures to contemplate. The U.S. economy may have provided a glimmer of hope yesterday with an improved ISM Manufacturing PMI number, but it will take more than one report to reverse worries about unemployment, housing, and consumer spending. The USD faced mixed trading and investors may be expecting another two days of crosswinds in the currency markets.

EUR

The EUR gained yesterday even as Germany released bad Retail Sales numbers. The gain in value by the Single Currency against the greenback on Wednesday may prove to be a short term move on the belief by some that the EUR has been oversold. The ECB will hold its monetary policy meeting and press conference today and it is likely that Claude Trichet will outline that the central bank is maintaining its path. What will be of interest for investors will be the words that President Trichet chooses to express his sentiment for the economic prospect of Europe. The E.U. will release its Revised GDP figures today and a result of 1.0% is forecasted. Investors seem more prepared to expect sluggish growth from Europe than they are from the U.S., maybe this is because they are used to seeing Europe grow in a rather mundane manner. However, the fear that slow growth and a struggling economic future could develop into a genuine downturn has not gone away and the ECB will get a chance to wage its ‘propaganda machine’ against this today.

GBP

A poor Manufacturing PMI report from the U.K. on Wednesday was enough to help drive the Sterling slightly lower against the USD. Mixed economic data has been the norm from the U.K. for a while now, but yesterday’s statistics came when investors had been starting to express doubts about the ability of the government to practice their austerity measures and achieve growth all in the same breath. Risk sentiment has become down beat the past month for the GBP and like the EUR it will take increased risk appetite to help turn the Sterling around. The Nationwide HPI and the Construction PMI figures will be released today and the Services PMI report will come tomorrow. With a handful of economic data around these next two days, the Sterling should expect to see volatility.

JPY & AUD

The JPY continues to battle within the highest points of its value against the USD as the Bank of Japan expresses its desire to have a weaker currency. The problem for Japan is that it has not been able to show the investment world that it has the capability of stemming the JPY’s climb in value. The AUD gained yesterday as Gold prices also traded at highs. The political situation in Australia has started to move and some answers may be coming soon regarding the gridlocked election.

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