U.S. Economy Worries Investors

U.S. economic data continued to come in negative on Wednesday, which promptly set off another wave of safe haven trading. Wall Street reacted to a bad ADM Non Employment Change number and poor result from the ISM Manufacturing  PMI with strong downward momentum. The USD did gain against the EUR in late trading, and the pair finds itself solidly within a middling range as investors look at both currencies and essentially are left pondering which currency looks worse. Today the weekly Unemployment Claims will be published, but tomorrow the official Non Farm Employment Change numbers are on schedule. The startling results from recent U.S. data outcomes have catapulted the notion that the global economy is on the verge of another downturn. Europe has not exactly helped risk sentiment either as the Greek debt saga continues. While officials maintain that Greece will receive a financial package by the end of June it is still not clear what measures the Greek government will be forced to undertake regarding austerity measures. And while a short term solution for Greece’s obligations may be found, it doesn’t necessarily mean that they are truly solving their overall problems.

Investors are left balancing risks on many levels. Thus a flight to quality once again began in earnest last night upon the bad economic data from the States. Europe, the U.K., and the States have all shared in a similar misery the past month with lackluster reports. Global equity markets have effectively traded south with a very fragile outlook. Commodity prices which jumped wildly for months have suddenly found mixed results. Gold as of this morning is trading around 1540.00 USD an ounce, which is in the strongest parts of its range, but much of the reason is not only an inflation fear but a byproduct of safe havens being sought. With the Non Farm Employment Change numbers on the horizon for tomorrow it is certain that the broad markets will remain cautious today.

Europe will be very light with data as many nations celebrate a holiday. The U.K. will release Construction PMI figures. Yesterday the U.K. presented their Manufacturing PMI results and like the U.S. turned in disappointing numbers. Mortgage Approval numbers were also below expectations yesterday from Britain. The GBP did lose additional ground Wednesday to the USD. Tomorrow the U.K. will release their Services PMI data.
The CHF remains a very active currency and continues to make gains as investors seek safe havens. While investors continue to show a belief in the Swiss, investors must also taken into account that the Swiss government is not overly enthusiastic about the CHF being too strong. As much as Switzerland is a financial services economy, it is also an export driven economy and thus the reason for the concern. Having said that, the CHF has many backers who are seeking a stable and relatively calm currency to hold.

The AUD did lose some value to the USD on Wednesday. The GDP numbers from Australia have given investors reason to pause and contemplate the notion not all is wine and roses for the economy. The AUD is likely to trade in ranges until the monetary policy statement from the Australian Central Bank next week. Tests for the AUD are likely to find impetus from afar as risk adverse trading is weighed globally.
The JPY has traded to the stronger side of its range still and it has accomplished this as the Japanese government goes through a crisis and the economic data continues to be negative. The JPY is a classic example of a currency that has mitigating outlooks. Short term the JPY looks destined to trade in a range that keeps it on the stronger sides of its value, long term the JPY should lose value in order to help kick start the Japanese economy. The problem is that Japan’s economic problems are so steep that managing the challenges is a constant battle.