Market Movers of the Day
Asia-Pacific
Australian Retail sales trend up 0.3% MoM
Europe
ECB benchmark rate left unchanged at 1%
EU GDP up 0.4% QoQ as expected
German PMI for services at 51.4 in line with expectations
EU PMI for services at 53 slightly lower than expected
EU Retail sales flat MoM
UK PMI for services at 56.6 versus 57.1 expected
Americas
US Initial Jobless claims at 457K Versus 480K expected
US Nonfarm productivity at 8.1% worse than market consensus
US Labor cost fall -2.5% for Q3 less than expected
US ISM Non Manufacturing disappointed reading 48.7 pointing contraction in services
The Overall Sentiment
Forex
After hovering close to its yearly lowers the Greenback encountered healthy demand and was pushed higher largely due to a weaker than expected US data. In the European front the EU GDP was in line with expectation with a 0.4% growth QoQ signaling the EU is out of recession and returning to growth. The ECB decision to leave the key rate unchanged at 1% was broadly expected however the ECB surprised with its announcement it will unwind emergency measures a little faster than anticipated, with 12 Month funding operations for banks to be linked to the Euro benchmark rate instead of having a fixed 1% rate for borrowing, living banks exposed to higher borrowing costs in case rates in the Euro zone will rise. The move signaled above all the ECB wishes to avert any asset bubbles when monetary policy is loose. The move was perceived as a first stage of a tightening process although very modest and preliminary it spurred bullish bets on the Euro which was already moving higher a head of the statement trading at around 1.514$ against the Dollar and 0.91£ against the Sterling. However a weaker than expected US ISM Non manufacturing data which showed US services sector which posses the largest portion of the US economy pointed contraction with a reading of under 50 igniting fears that the high unemployment is might be dragging the sector down. The ISM publication snapped Euro early gains against the Dollar and pushed the Greenback higher against most of its peers closing at around 1.505 against the Euro,1.65 against the Sterling and climbing back above the 88¥ level against the Japanese Yen.
Wall Street Update
The weaker than anticipated ISM Non manufacturing data hammered benchmark indices snapping 3 consecutive days in the money. The weaker than anticipated ISM data which pointed a contraction in the services sector suggested recovery might be bumpy. Stocks also reacted to the statement by Bank of America the US largest bank by assets that it intends to raise $19.3 billion in public share offering to free itself from government ownership. The move ignited a selloff in banks stocks including BoFA as investors feared other government supported banks will do the same thus diluting share holders even further. BoFA eventually edged higher as investors acknowledged the fact that when the bank will be freed of government ownership it will be more flexible and competitive. At the day’s end the DOW fell -0.83% and the S&P was lower by -0.84%.
Commodities
The strong Dollar pushed commodities lower with Gold falling from its record of 1,226$ an ounce to the 1200$ Support. Oil moved lower to 76$ a barrel hammered by a strong Dollar and a weaker than expected economic data.
The Day Ahead
Market eyes will be focused on the unemployment figures coming from the US with Nonfarm payrolls expecting to shed -111k jobs and unemployment to stand at 10.2%. Market is expected to be nervous a head of the data as the weaker than expected ISM non manufacturing data disappointed a day before and spurred some pessimism over the economic recovery. The US unemployment figures could have a dual effect on the Dollar strength with better than expected unemployment potentially spurring optimism boosting risk appetite and pushing the Dollar lower but on the other hand stabilizing unemployment could bring monetary tightening by the Fed however distant it seems to be slightly closer and provide support for the battered Greenback.
Bullish Scenario– A close above 1.06 would signal the pair is moving to retest the bearish trend line around 1.0720
Target -1.072
Bearish scenario– A break of 1.04 downwards would generate a strong bearish swing, targeting the 1.02 support and under.
Target A-1.02
Target B-1.012
Daily Forex Market Analysis provided by eToro
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