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.
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.
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.
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.
The USD traded in range against the EUR on Tuesday and managed to gain a bit versus the GBP. Trading remained rather tentative as the U.S. produced a mixed bag of data for investors to study before the onslaught of jobless releases gets underway today. While the SP/CS Composite-20 HPI and the CB Consumer Confidence readings both bettered their estimates, the Chicago PMI Index came in worse. Today the ADP Non Farm Employment Change number is on the calendar and is expected to have an outcome of 20k. Also the ISM Manufacturing PMI data will be brought forth and the forecasted outcome is 53.2. While the jobless data today will be of interest the potential exist for the ISM Manufacturing PMI result to cause a flurry in the broad markets if it should turn in a surprise.
President Obama was able to find a microphone yesterday and tell the American public that the economy is his main mission, but it is probable that many people already assumed this. With September now started the U.S. will go into full election campaign mode and politicians are certain to be just as nervous as investors. A cynic might add that President Obama has shown a ‘sudden’ interest in the unemployment situation that ‘coincidently’ comes the same week the government will issue its official Non Farm Employment Change data on Friday. The jobless statistics this week are not expected to bring much joy and the downbeat prospects for the U.S. economy are causing concerns to flourish among investors. August proved to be a difficult month for Wall Street, but it also brought out throngs of safe haven trading as the USD gained in value.
The EUR managed to trade in range against the USD on Tuesday as it found some stability. The EUR has certainly been under a dollar centric shadow the past few weeks as heightened talk about a downturn in the U.S. economy has raised eyebrows among investors who are concerned about the implications this has for Europe. The German Unemployment Change number came in below expectations yesterday, but it is their counterparts in the E.U. which have largely caused nervousness. German will release its Retail Sales numbers today and a gain of 0.6% is expected. Tomorrow The ECB will hold it monetary policy meeting and press conference and this will be a key spectrum for investors. The EUR traded under pressure the past few weeks as risk adverse sentiment reemerged and with nervous markets still in the midst, opportunities may exist to test ranges.
The Sterling moved a bit lower against the USD as Tuesday’s sessions came to an end. While Mortgage Approvals beat expectations slightly, the Net Lending To Individuals numbers disappointed investors. Today the Manufacturing PMI will be released and its forecasted reading calls for an outcome of 57.1, which would below the previous month’s result. The Nationwide HPI is on the schedule for tomorrow and on Friday the Services PMI data will be brought forth. Thus, the U.K. will have three fairly steady days of economic data for investors to monitor and they will also have the overhang of the U.S. jobless numbers to take into account. Mixed data has been prevalent in the U.K. for months and the trading within the GBP has been transfixed by risk sentiment.
The JPY continues to hover near its highest values and its implication on the Japanese economy continues to spark concerns. While various government officials speak about possible intervention this has hardly scared away investors who seemingly continue to pile in. The AUD remains locked in a tight range and the outcome of the Australian election is still up in the air. The current results show a deadlock and these results have left many AUD investors at a standstill. Gold broke free of consolidation on Tuesday and climbed. The precious metal needs to be watched carefully in these nervous markets.
The USD continued its strong pace against the EUR and GBP on Monday as it moved to the stronger parts of it recent range. Safe haven pressure was the story of the day as Wall Street struggled and all the major indexes suffered losses. The U.S. released light data yesterday including Personal Spending and the results were near expectations. The gist of the day belonged to the languishing sentiment that has carried over from the negative opinions that have been expressed much of August. Today marks the end of the month and there are several rather interesting reports on schedule. The day starts off with the SP/CS Composite-20 HPI and will be quickly followed by the Chicago PMI reading. The CB Consumer Confidence data will then come out and after this the FOMC Meeting Minutes will be published.
President Obama tried to get into the act yesterday, but his speech didn’t warm the hearts of investors. The U.S. economy finds itself sitting in the midst of troubling circumstances. The data today will be important, but jobless figures begin in earnest tomorrow with the ADP report and will climax on Friday with the Non Farm Employment Change statistics. Yesterday’s trading volume on Wall Street was extremely light and this helped propel the market downward without much in the way of support. The FOMC Meeting Minutes may provide fascinating reading for observers today. Rumors have been rampant that the Federal Reserve’s ‘ruling council’ has not seen eye to eye recently and that the level of debate regarding policy has become heated. President Obama’s speech yesterday showed that the government has the ability to use rhetoric about joblessness, but the question investors are asking is what real possibilities exist to create not only stability but growth. The USD proved to be a magnate yesterday and it may continue to find backers if nervous markets persist.
The EUR lost ground to the USD on Monday as traders continued to have their concerns raised about the prospects of a knock on effect should the U.S. economy stumble. The Sovereign Debt issues within Europe in many respects have been continued to be pushed back and not discussed in full, but there is little to stop investors from the rationalization that a poor economy in the States will lead to additional tough times in the E.U. and therefore little in the way of growth. There was no major data from Europe yesterday and today will remain relatively light with the German Unemployment Change and Italian Retail Sales figures. The E.U. will also publish its Flash CPI Estimate today. Tomorrow German Retail Sales will be brought forth. The crux of the matter for investors this week will be the ECB monetary policy meeting on Thursday and what Claude Trichet has to say about the economic forecasts for Europe. The EUR will continue to find itself under a dollar centric mantra because of recessionary fears coming from across the Atlantic and the rather unsavory equation that this creates in the E.U when weighing austerity versus growth.
"We have a considerable way to go to achieve a full recovery in our economy, many Americans are still grappling with unemployment, foreclosure and lost savings"
