The Trend Continues

Risk appetite propelled the USD lower against the EUR and GBP on Tuesday as the Greenback got pushed to the lower depths of its value in comparison to many of the major currencies. International bourses continued to trade positively and Wall Street finds itself touching high water marks. The ISM Manufacturing PMI beat expectations yesterday with a result of 60.8 compared to the estimate of 57.8. The day before, the Chicago PMI did well too, which essentially sets the table for the coming jobless data to prove if there has been better hiring also. Today the ADP Non Farm Employment Change is on schedule and this will be followed tomorrow by weekly Unemployment Claims and then the critical official Non Farm numbers will be delivered Friday. Investors have used what have been good corporate earnings reports to fuel their loftier price ambitions this past week and the question is if the jobless data will add to their positive spirit.

As risk sentiment has risen the past few weeks a steady decline in the USD has set in. While there are many concerns that still exist within the U.S. landscape regarding jobs, housing, and consumer spending, investors have chosen to certainly participate in the momentum seen in the major stock indexes and this has turned into a trend. The question is if a reversal could take place due to the perceived fragile nature of this ‘rebound’. Investors internationally have seemingly turned their heads away from the ‘troubles’ in the Middle East and the Sovereign Debt concerns. It appears that the temptation of chasing the broad markets has become too strong for many. Taking into consideration the amount of psychology that translates into ‘market confidence’ investors have shown that they are able to keep their focus on the growing rallying cry that the U.S. has better days ahead. However, plenty of skeptics still exists and question the outlooks for growth. Those that have questioned the recent trends with the weakness in the USD though have been burned. There is no question about what the trend has been, but the problem is figuring how long the path will continue.

The EUR and GBP continued their strong moves against the USD on Tuesday. Data from Europe and the U.K. continues to be mixed at best. Today there will be no major news from either sphere, yesterday’s rather questionable data in housing prices and lending from the U.K. were shrugged off. The Manufacturing PMI report was better as it posted a reading of 62.0 compared to the estimate of 58.0. However, it is doubtful that this statistic had much to do with the climb of the GBP. The economic outlook of Europe and the U.K. respectively remains cloudy. The financial crisis within government debt has not subsided, nor have there been bona fide numerical fundamental answers given except for words spoken. Tomorrow the ECB will post their monetary policy meeting results and ECB President Trichet will hold his monthly press conference. Last month he bolstered the EUR as he spoke about the risks coming from inflation. The EUR and GBP both find themselves at the high end of their values and traders will certainly have an opportunity to test their ranges.

The JPY kept up its strong pace against the USD and the AUD maintained the upper echelon of its values. Gold traded in a consolidated manner. Many Asian bourses are closed starting today because of the Lunar New Year holiday underway. Thus trading should be monitored closely regarding volumes. The AUD has shown remarkable strength taking into consideration that Gold has stumbled in the past two weeks. In the short term a major weather story is about to take place in Australia today and tomorrow as a cyclone nears, and traders should monitor the AUD carefully.