The Jobless numbers from the States today will steal the spotlight from the problems Europe is facing going into the weekend. The USD lost ground to the EUR and GBP yesterday as more stability came into the market. The EUR showed that it was trading on firmer footing going into President Trichet’s monetary policy press conference yesterday and it came out unharmed. Having said thatm the reason the EUR probably has found safer water for the time being is that the peripheral bond yields for its struggling nations have found some backing the past two days. The question is where this support is coming from and there are plenty of rumors that suggest it is in fact the ECB that is purchasing the debt. Now that may be a good short term solution, but long term the prospects of Europe essentially buying its own bad debt in order to create better sentiment will likely be put to the test, particularly if nations such as Ireland, Portugal, Greece, and Spain continue to find tough economic roads.
Thursday’s data from the U.S. proved a mixed bag with the weekly Unemployment Claims missing its estimate, but the Pending Home Sales did show an improvement. Today’s Non Farm Employment Change numbers are forecasted to turn in a result of 143k jobs gained. While the gain would be a positive, it will have to be taken into context with the reality that unless the U.S. is adding over 300k a month that it is not going to make a big dent in a poor unemployment figure.
Wall Street turned in another good day of trading in the major indexes and global bourses largely followed suit. Some of the gains may be a technical bounce after a few rather lackluster weeks and investors will watch the equities closely today to see if the gains can be sustained going into the weekend. The data from the U.S. has been mildly positive the past couple of weeks when taken with a rather rose colored perspective. Today’s jobless figures will be important, but it is wise to note that some of the gains are directly related to employers adding jobs for the holiday season and the better figures could prove to be short lived if consumers do not show their muscle in the coming weeks when opening up their pocket books.
The USD and the EUR along with all the major currencies have questions hovering over them regarding economic prospects and government policies. The movement in the currencies has been largely effected by the dire warnings coming from the European debt crisis, but the U.S. has yet to prove that it has found the golden road to success either.
The U.K. will release Services PMI statistics today, but the Sterling is likely to find itself under a EUR centric cloud going into the weekend. The GBP has traded on the heels of the Sovereign Debt crisis for the past few weeks and that will not change today. The U.K. like its counterparts has seen mixed data and continues to face a challenging economic environment. The monetary policy from the Bank of England has been called into question regarding its ability to counter poor growth. The BoE is charged with making sure that inflation is under control and has a stated policy of not being a political beast. The problem is that inflation is not the real problem facing the U.K. and that in order for it to help achieve growth it must be in step with political leanings (or at least be able to get the ear of politicians) so a cohesive plan can be enacted. And that is easier said than done.
Politics have become a key element within economic policy for countries as politicians play to the public when trying to get support for policy. Unfortunately many of the solutions offered are thought to be merely quick fixes by many institutional investors and the core fundamental problems still exist.
The JPY found itself back within a well practiced range on Thursday gaining enough to put itself in the middle of a well practiced trading pattern. The AUD did gain against the USD also, and the fact that Gold has sustained a rather strong trend and not given back its recent profits give the AUD some ground to stand on.
Today’s trading should prove a test of sentiment. The EUR has seemingly found some calmer water, but the question that will be asked is how long tranquility can last? As pointed out here many times, there is a keen difference between short term and long term inclinations and traders will have to decide which avenue they are following.
Written by bforex.com
