Nervous Sentiment & Jobless Data
07-01-2011
The EUR moved to the lower depths of its recent value against the USD on Thursday as it stumbled out of the gate early and never recovered. The GBP followed suit, leaving both currencies looking rather weak against the USD and setting up a potentially volatile day with the Non Farm Employment Change numbers on the schedule from the States. The weekly Unemployment Claims figures yesterday put a damper on the good ADP report from Wednesday and this puts the onus directly on the Non Farm numbers which are expected to turn in a result of plus 159k jobs. Also setting the tone for a rather cumbersome day of data yesterday were weaker than expected Retail Sale, from Europe, which turned in a negative -0.8% outcome compared to the anticipated gain of 0.3%. Adding to the fire today will be German Retail Sales numbers, which are expecting a slight gain.
The combination of less than full volume, big data coming today, and a USD which has been putting pressure on the EUR could end the first week of trading in 2011 with a dramatic flair. Gold languished again yesterday as did other commodities and the question that must be asked is if speculators have run out of gas in the physical resource sector or if this is a cautionary moment. Of course the commodities could turn back to a divergent sphere again, this if concerns about paper money do not go away and continue to make Gold strong in the face of questionable worldwide demand due to clouds on the international growth horizon.
Investors will be looking for the Non Farm numbers from the States to provide a positive stance in the broad markets and increase risk appetite, any disappointment with the results could set up a rather interesting firestorm. Adding a touch of grey to sentiment yesterday were the lackluster Retail numbers from Europe. Companies and some analysts are blaming bad weather for the weak consumer spending and the question is if this is true or if something more sinister is lurking – namely poor confidence among the public. In addition to the less than stellar European data, the U.K. also turned in a rather ugly Services PMI reading with a result of 49.7, compared to the forecast of 52.9. Thus, investors must digest a swift return to rather troublesome data and take into account that Sovereign Debt concerns in Europe continue to be steadfast. Questions abound about what waits down the road for Greece, Ireland, and others.
The JPY traded in range on Thursday and the AUD also found some tranquility after a few volatile sessions. Gold fell to around 1366.00 USD. And going into Friday with so much on the plate internationally including critical data, nervous sentiment, and volume that is not quite back to normal as many are still finishing off their holidays, the markets could put on quite a show. The USD has been strong this week and with the advent of the Non Farm Employment Change numbers only a handful of hours away, traders will have to be ready for all things. Ranges are likely to come under pressure from momentum before the data from the States, and then will likely move according to risk appetite.
