The USD picked up ground in a swift manner against the EUR and the GBP when the jobless data showed that the U.S. unemployment situation is still getting worse. The Non Farm Employment Change numbers produced a figure of minus -467K compared to the estimate of minus -360K. The Unemployment Rate now stands at 9.5%, which is a 26 year high. The outcome from the payrolls roiled the equities markets in a violent manner as both the Dow and S&P tumbled. The weakness from Wall Street had an immediate effect on the USD. The greenback found backing as weary investors turned to the proverbial �safe haven� plays. The U.S. is on holiday today and trading from the States will be extremely light in the currency markets.
No data will be coming today from the U.S. because of the Independence Day celebrations getting started and Monday will see the release of the ISM Non Manufacturing PMI. Traders should expect a relatively flat marketplace today and if volatility rears its head within the currency markets it could be taking place because an investor is trying to take advantage of what should be less than exciting volume. The results from the jobless data will certainly start yet another firestorm as its merits are debated. Some economists are sure to point out that the unemployment data is a lagging indicator � meaning that it is not forward looking. However, others will point out that unemployment is a prime motivator within consumer confidence and that weak job prospects coupled with the fear of losing a job in a deep recession will continue to cause ill winds. Because of the holiday in the U.S. today the markets could see some players try to take advantage of a timid market. Traders will have to be aware that today�s results may be due to residual effects from yesterday, but also may lack impetus from real market movers.
As expected the ECB did not change their interest rate and the EUR found itself trading in a dollar centric mode coupled with rather interesting issues arising from the European Union. The EUR lost ground to the USD in a rather quick pace as international equity markets slipped on the negative U.S. data. Adding to this picture was the press conference held by ECB President Trichet who proclaimed the �party line�, saying that signs of stability have emerged although economic activity remains week in the European Union. He added that there is a chance for growth coming about sometime in 2010. Trichet also talked about the banking situation in Europe, encouraging banks to lend more in order to help stimulate the economy. However, it remains unclear at best if financial institutions have that capability. Europe did release its Unemployment Rate yesterday and the broad data showed that the continent�s jobless problems are increasing. A rate of 9.5%, the same exact rate as the U.S. was reported. The German Parliament today will be discussing the possibility of creating a �bad bank� in order to handle the toxic debt within their financial system. The European Union will release its Retail Sales figures today. It should be a relatively flat day for the EUR due to the holiday across the ocean but traders should be cautious for sudden gyrations.
The Sterling lost ground to the USD on Thursday on the heels of the jobless data from the States. Only the Construction PMI data was released yesterday and it produced a reading of 44.5, which was below the forecasts of 46.1. The Halifax HPI has been pushed off again and is now tentatively showing a possible release this coming Monday. That essentially leaves only the Services PMI as the main economic data and it is forecasted to be 51.8. Making some waves yesterday from the U.K. is a report that the government is going to issue new regulatory standards for its banks next week and they supposedly will be much �harsher� than the previous model practiced. With the holiday being celebrated in the U.S. today, the GBP could find itself wandering within a relatively well known range going into the weekend.
The JPY picked up some ground against the USD as global equity markets were propelled downward on Thursday. The violent reaction in the bourses caused the risk adverse to come out of the cracks as expected. However, the trading between the JPY & the USD as pointed out several times is within the firm grasp of a consolidated pattern and its movements have been rather muted. Gold traded around the 933.00 USD mark as the day came to an end. JPY traders should expect a rather quiet day of movement considering the U.S. holiday.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst