1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Yesterday’s Divergence Means More Volatility

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Jan 18, 2010.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
    Likes Received:
    The USD was mixed against the major currencies on Thursday in perhaps the most interesting day of foreign exchange thus far this year - showing inconclusive results. The Retail Sales and weekly Unemployment Claims numbers all came in slightly worse than estimated. While Intel provided Wall Street with a good quarterly report and a positive outlook, the broad economic window from the U.S. was not quite as bright. Today the Empire State Manufacturing Index reading and the University of Michigan Preliminary Consumer Sentiment survey will be published. Both reports are forecasted to show improvements. Also the CPI data will be brought forth but inflation is not likely to show its head today. The Retail Sales numbers which were negative were balanced out by the Intel corporate numbers. The Empire State data has an anticipated reading of 11.2 and the U. of Michigan survey carries an estimate of 73.8.
    As for the USD performance yesterday it gained on the EUR while losing ground to the GBP and JPY. The price action against the EUR was certainly impacted by the events unfolding in Europe. The divergent market means that currency traders will have to be ready for the possibility of another volatile day as ranges get tested and normality is searched for. The Empire State report along with the Consumer Sentiment numbers could be enough to cause a reaction. Also there will be an Industrial Production figure presented and it is expected climb by 0.7%. Wall Street will be looked at by traders as a barometer for risk sentiment and investors will see if equities can close out the week on a positive note. Taking yesterday’s currency trading into account, market participants today will have to remain attentive to short term trends.

    The EUR was taken lower against the USD on Thursday as sentiment appeared to be driven by news events. The ECB held their monthly monetary meeting and there were no surprises. President Trichet was questioned on the Greek budget problems and he danced around the issue saying that all was in order and that Greece will be able to manage their problems. Investors should have been prepared for the answers Trichet gave. What may have caused problems for the EUR yesterday, were the loud murmuring coming from Germany that Chancellor Angela Merkel may resign her post. This was quickly denied by her government and said to have no foundation. However, the fact that the rumor seemed to widen on Thursday may indicate that even if Merkel is not going to resign that there may be some very large problems within her coalition. Germany is the engine of Europe and concerns about its leadership as the European Union deals with a struggling economy may have triggered some concern. Europe will release CPI data today and Trade Balance figures but it will be the story coming out of Germany today that provides a lot of the impetus for the EUR.

    The Sterling gained against the USD on Thursday which highlighted the divergent nature of the currency markets. There was no major economic data from the U.K. yesterday. Today only the CB Leading Index is on the calendar meaning that the GBP will largely stay under the guise of risk sentiment which comes from the equity markets including the results on the FTSE. The Sterling has managed to push its way to a stronger value this week against the greenback and it has done that as the economic picture from the U.K. remains hazy. Going into the weekend and taking into account the recent gains by the GBP, traders may find themselves with an opportunity to take advantage of existing ranges.

    The JPY picked up ground against the USD on Thursday as risk adverse trading seeped once again into the Asian markets. The JPY remains in a well practiced range with the greenback but has been ebbing stronger for a week now. Some of the concern affecting investors has to do with the problems of JAL, the Japanese Airline, and what appears to be an impending bankruptcy. The Japanese economy has a large dark shadow hovering above it and a stronger JPY does little to help. However, if investors continue to search for a safe haven, the JPY could find itself at the stronger parts of its range for a while.


Share This Page