Divergent Data, Divergent Views

By Mercaforex

USD

The USD gained on Friday and this came on the back of a better than anticipated Non Farm Employment Change number. As much as the jobless figure typically runs the show on the first Friday of every month, the USD did find impetus from outside sources. While Wall Street continued its winning streak and the bond markets struggled, the 1 USD showed gains against most major currencies. However it is clear that the USD is still trading at the weaker side of its range and it will take more than a few good days for the greenback to signal that a reversal is truly underway. While it is possible that the FOMC move earlier in the week has now been fully digested by investors it is the long term policy of the Federal Reserve and Treasury that sill have traders questioning the strength of the USD. The election result also earlier in the week does offer a divergent avenue and give credence to those who believe that the debate on spending and austerity will create constant background music in Washington.

This will be a relatively quiet week for data from the States. There is a holiday on Thursday which will affect volume before and after the Veteran’s Day observances. As much as the Non Farm Change Employment number posted a gain, its outcome still leaves much to be desired and in order to change the Unemployment Rate in the U.S. the States will have to add many more jobs than the outcome of plus 151k. Also the Pending Homes Sales data came in far below expectations and this may eventually be something that worries investors again. The U.S. will not be releasing any major data today and it is likely that investors will continue to listen to the speeches coming from Fed officials and the manner in which it is perceived that a weaker USD is not being looked upon unfriendly by certain officials. The USD has been volatile under a wake of many tides. In its midst the bond market has given way to Wall Street as investors look for places to make trading profits. However, the U.S. economy remains on tenuous ground and many questions are certain to be sounded in the coming weeks.

EUR

The EUR lost ground to the USD on Friday as the day came to a close, and it did this as some traders must have been wondering how long the EUR can trade under a dollar centric mode and avoid its own storm clouds. The EUR has been particularly strong the past two months, but many investors believe this has taken place as the Federal Reserve across the Atlantic has done their best to weaken the greenback. Ireland, Greece, Portugal, and other financial dilemmas have not suddenly disappeared and questions do persist about the ability to put the brakes on spending. Austerity measures are being pressed for in Europe, but in many places the public has not particularly looked on changes to social mandates kindly. The German Trade Balance numbers will be published today along with the German Industrial Production results. These numbers will be watched carefully, but the real pressure on the value for the Single Currency will likely depend on what takes place among the European bourses today.

GBP

The Sterling remains within the higher realms of its values against the USD even after it lost some ground to the greenback on Friday. The Sterling finds itself comfortably within the stronger parts of its range. The question is if this will continue in the long term. There is very little data from the U.K. today on the calendar, but tomorrow the Manufacturing Production, Trade Balance, and Industrial Production statistics will all be brought forth. On Wednesday the BoE Inflation Report is on the schedule and this is likely to underscore that the U.K. economy remains in an awkward place like its major counterparts. For the time being talk of a double dip recession has worn thin and not finding much voice, but concerns remain for long term prospects. The GBP has done well the past month and traders are certain to find a test of its ranges continue this week.

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JPY & AUD

The JPY crawled to some slight loses against the USD on Friday, but it remains solidly within a sphere that it has fashioned for a long duration now – taking into the account the brief intervention attempt by the Bank of Japan before. The strong JPY remains a thorn in the side of Japanese export companies, but what can be done to change the value of the currency remains a tricky subject. The AUD is trading at highs and it is largely doing this under the auspices of a strong Australian economy and the record prices in Gold. The AUD continues to show no let up and it is likely to find plenty of attention this week with so many forces swirling around it.

Divergent Data