The markets are being bombarded with an abundance of late week data, and there is more to come today (Friday). Much of the data has been properly anticipated.
In the UK, the Central Bank Rate remained unchanged at .50% and the Bank of England did increase what they call their “Asset Purchase Facility” by £50B. There is no surprise here.
The European Central Bank did reduce their bank rate by .25% to .75%. Again this was as expected, though the euro, confronted with the realization that the era of the Jean-Claude Trichet inflation-fighting rate was over, may have helped the slide.
The results of the Spanish auction did not help the euro. They did sell their target of 3.3B but the rate was 6.43%, an increase from 6.04% at the last auction. How much of this debt was purchased by the troubled Spanish banks? Help promised at the Brussels meeting last week was not forthcoming.
This moved the EURUSD to the down side, and once the 1.24 handle was captured by the bears, the market gained some momentum.
The US employment data was not as bad as anticipated and might have added some pressure to the market. Both the ADP Non-Farm Payroll and the weekly report of the initial unemployment claims were better than the guesses. At 10 a.m. NY time (yesterday), the ISM Non-Manufacturing PMI came out at 52.1 worse than 53.7 a month earlier.
Today we get the US unemployment rate and the always volatile Non-Farm Employment Change Reports. As previously mentioned, we are skeptical of the accuracy of employment reports during an election season. It is very easy to report a number and then revise it six months later, after everyone has forgotten. However, if we receive a weak number this may spook the USD bulls who will then fear QE 3. Expansion of the USD supply by the Fed is feared because it usually weakens the currency.
Usually it is best to get the numbers from the NFP Report, and then see how the market responds, looking for trades at that time. We intend to do that today.
[I]
I have no positions in any stocks or currencies mentioned, and no plans to initiate any positions within the next 72 hours.[/I]