A relatively quiet start to trade this week as global calendar is virtually barren.
[B]Talking Points
• Japanese Yen: Fails to hold 108.00
• Euro: Consumer sentiment at worst levels since 2003
• British Pound: Hometrack housings survey shows 10th straight month of declines
• US Dollar: No data on tap[/B]
Euro Holds Its Own as German Sentiment Hits Lowest Level in 5 Years
A relatively quiet start to trade this week as global calendar is virtually barren. The EURUSD traded on either side of 157.00 for most of the Asian and early European session, but took s small tumble after GFK consumer sentiment registered its worst reading in 5 years. GFK fell to 2.1 from 3.5 hitting lows not seen since 2003 as high oil prices, high interest rates and a slowdown in global demand depressed the region’s consumers despite the near record value of currency exchange rates.
The news suggests that the slowdown in US economy has now crossed the ocean and made its unwelcome presence felt on the other side of the Atlantic. Given the massive decline in European consumer sentiment, which is likely to cause a similar collapse in spending, it is difficult to imagine how the ECB would raise rates any further for the rest of this year. Nevertheless despite a slew of negative economic data over the past week, the EURUSD has managed to hold on to its gains to a remarkable degree as currency traders continue to view the unit as a safer alternative to the dollar.
With the greenback clearly stabilized for now, the question forward is can its nascent the rally continue for another week? The answer as is so often the case may depend on the NFPs’. The front of the week may actually prove dollar positive as flash GDP for Q2 could show surprising strength of 2% versus only 1% the quarter prior. However, the labor data holds the key. If NFPs surprise to the downside, most importantly breaking the -100K barrier, dollar longs will be hard pressed to push the unit higher. Weakening labor markets will only convince the dollar bears that the worst for the US economy lies ahead.
With nothing on the calendar in the North America session today, trading is likely to be driven by macro factors as market players will look to oil and commodity index as well as equities for clues to direction. The data this week is very back end loaded and unless we see significant movements in other markets currencies are likely to remain in this quiet range for the rest of the day.
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