USD:
The USD gained against the EUR and GBP on Tuesday as the U.S. stock markets began to take it on the chin as the day progressed. Wide losses coming on Wall Street appeared to have thrown a familiar �ring� of risk aversion into the currency markets internationally. This occurred even as the ISM Manufacturing PMI report produced a better than expected reading of 52.9 compared to the estimate of 50.6. Also the Pending Home Sales figures outcome showed a gain of 3.2%. While the economic statistics may have provided investors some impetus for positive sentiment among some, Wall Street shrugged off the better numbers. Perhaps this had to do with a perspective that share values had gained significantly before and in essence had already priced the positive data into the market. It also did not help Wall Street that a handful of powerful voices have expressed doubts about the recent bull run.
Today the ADP Non Farm Employment Change numbers are due, which is a forerunner for the government report scheduled on Friday. Today�s employment numbers are expected to be an improvement over the previous results as are other releases that are on the calendar such as Factory Orders. Tomorrow the Weekly Unemployment Claims will be brought forth before the data climaxes on Friday in the U.S. with the critical Jobless data. Yesterday�s trading results may sound a warning siren for some investors who have questioned the notion that improving data does not necessarily mean that the recession is about to end quickly. Simply put, just because manufacturing numbers are improving, this does not mean that factory capacity is high enough to set off a celebration parade. The same can be said for the Pending Home Sale outcome from yesterday, the numbers may be better but only compared to what has been a very poor market. Thus major questions still persists about the U.S. economy and Wall Street which seemingly jumped ahead of the game with better results in the summer may find a difficult path in the coming days. If the stock markets struggle, traders may find a USD which finds additional support under the guise of the �old banner�- safe haven.
EUR:
The EUR struggled as the day progressed on Tuesday as international equity markets began to tumble. The German Retail Sales figures met expectations head on with a 0.7% outcome yesterday. Today the broad European Revised GDP data is on schedule and a figure of minus -0.1% is anticipated. While this number could prove noteworthy if it provides a surprise, it is more likely that investors will continue to stay fairly cautious before the ECB announces their key interest rate decision tomorrow and President Trichet holds his press conference. The European Union stands on a rather delicate precipice. The past few weeks have produced better than expected data and thus proclamations of a broad economic turnaround have been heard. However, investors will be on the lookout for Trichet�s perceptions tomorrow and the substance behind his words. While the EUR has managed to stay at the higher end of its mid-term range against the USD it has also showed signs of not being able to push much further. With questions hovering over nervous equity investors, the EUR may find itself under pressure.
GBP:
Sterling found a difficult road with the combination of a disturbing Manufacturing PMI and a stock market that slumped. The Manufacturing PMI turned in a reading of 49.7, which was below the expectation of 51.5. While some British politicians have been speaking up their belief that the worst of the recession is behind, the currency market proved that not all is wine and roses in reality and that troubles may continue. The U.K. like its international counterparts may in fact have seen the bottom of an economy in crisis, but as pointed out before stability does not mean that meaningful growth is sure to follow. Today the U.K. will release its Construction PMI and an outcome of 48.1 is projected. The Halifax HPI has been pushed back yet another day and may see light tomorrow, the Services PMI is definitely on the calendar for Thursday however. The GBP has had a difficult week of trading after turning in rather stellar results the last month, investors will continue to monitor the Sterling and test its resolve.
JPY:
The JPY gained again against the major currencies as Asian investors and others continued to prove that nervous bourses make for a stronger Japanese currency. It may only be a coincidence, but it should be noted that the recent strength of the JPY has also come on the back of the Chinese bourses � particularly the Shanghai market � struggling the past two weeks. Gold was able to maintain is ground on Tuesday and hovered around the 955.00 USD mark. The JPY has enjoyed a strong run against a wide basket of currencies and it now stands on the stronger side of its range against the USD and may prove interesting to watch the next few trading days.
