The USD traded in a consolidated range against the major currencies on Monday and importantly did not give back very much of its gains made in Friday�s volatile session. The U.S. did not release any major economic data yesterday and the Unemployment data from the previous week continued to be a point of debate as the merits of a minus -345K result from the Non Farm Employment continued to be a focal point. There is a wide array of interpretations regarding these numbers and as pointed out here yesterday a key barometer should be the results from the equities markets which continued to turn in lackluster returns on Monday. While certain segments of the �talking heads� crowd spoke about stability and actually voiced their belief that the Federal Reserve may have to increase their interest rate come September or later in the fall, others weren�t so confident. The San Francisco Fed actually published a note of caution regarding the amount of employees being forced to take on part time jobs by their employers or face the peril of no job at all. It is true that the rapid rate of job may have slowed the past month, but the number of people still losing their jobs is twice then the amount before the fall of Bear Stearns last year.
The U.S. will not release major economic data again today but tomorrow the Trade Balance and Crude Oil Inventories reports are due. Timothy Geithner is scheduled to testify before the Senate today and the Treasury Secretary could affect the market. However, with so many government officials offering their various opinions about the health of the U.S. economy it is unlikely that Geithner�s words will be heard above the din that has become the norm. On Thursday the weekly Unemployment Claims and Retail Sales numbers will be published. Also causing concern within investment circles are the increasing Mortgage Rates that would-be homeowners are now finding. The housing market in the States is a critical lynchpin along with the employment story. As long as these two large fixtures within the U.S. economy remain troublesome it stands to reason that this recession may not go away no matter what officials are hoping for. The USD showed signs of stability yesterday after its swift gains last week. The reasons for the greenback�s climb remain under debate but it does appear the USD has further room to test the other currencies.
The EUR traded in a fairly tight range on Monday and was not able to recover much of its lost ground against the USD before going into last weekend. The German Factory Order numbers were reported on Monday it came in unchanged as predicted. Today the German Industrial Production outcome is due and it is expected to be unchanged also. This is a relatively light week of economic data from the European Union and the focus for investors is likely to remain on the questions surrounding the health of the banking system which continues to come under scrutiny from various places. The EUR is likely to find itself trading in a dollar centric mode today and investors will thus have to watch what is taking place on the international equity markets and judge where risk appetite stands.
The Sterling regained some footing on Monday after its rather steep fall on Friday. The BRC Sales Monitor in the U.K. reported a fall of -0.8% and the previous number was a gain of 4.6%. The RICS House Price Balance improved to minus -44.1%, which was better than the reading of minus -52.0% previously. Today will be a relatively quiet day of data from the U.K. and it will be the political storm that once again dominates news. Tomorrow the U.K. will release its Manufacturing Production and Trade Balance results. The Sterling has had a remarkable stretch of viable gains the past couple of months after being stormed by the USD in the early days of the financial crisis. The GBP seemingly has found some of its historically strong footing again, but questions remain about the recession and the viability of Gordon Brown�s U.K. tenure as Prime Minister.
The JPY found itself in a very tight pattern against the USD on Monday after lurching back to the weaker side of it range. The JPY now seems poised like a lot of the marketplace for the next round of impetus wherever that comes from. International equity markets turned in rather mixed results yesterday calling into question the strength of the �green shoots� legions who have not been able to muster a new rally even though the U.S. �supposedly� turned in such a good data last week. Gold finds itself at an interesting juncture around the 950.00 USD mark. It appears Gold is trading in a heavily dollar centric fashion too.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst