Market Movers of the Day
*EU Producer Price Index better than expected at 0.2%
*UK PMI Construction better than expected at 47.0
*US ADP Employment Change worse than forecasted at -169K
*US EIA Crude Oil Stocks rose 2.1M
*US Fed’s Beige Book
The Overall Sentiment
US stock markets closed rather flat in a day with no major key economic data releases. A slightly negative sentiment from the ADP Employment figures was reversed as the Fed stated in its Beige Book survey that the US economy shows “modest improvement”. The S&P was virtually unchanged advancing less than 0.1% and the Dow lost 0.2%. In Europe, the British FTSE 100 added 0.3% led by gains from mining companies on rising metal prices. The German DAX managed to advance another 0.1% on top of yesterday’s 2.7% rally. Japanese Nikkei 225 rose 1.7% as the Yen weakened against the Dollar on the Fed’s reports of US economic improvement.
The Dollar ended with moderate gains against most majors in a rather calm day of trading ahead of some key economic data scheduled for the rest of the week. EUR/USD failed to hold the 1.51 level settling around 1.5050 ahead of the ECB’s monetary policy decision. The Pound strengthened against the Dollar and the Euro with GBP/USD in the 1.6650 area and EUR/GBP falling to 0.9050. For commodity-linked currencies the day was mixed as Gold continues to skyrocket but Crude Oil retreated on increasing stockpiles. The Aussie dollar advanced for a second day against its US counterpart but the Canadian dollar weakened. The Yen declined against all majors as bets increase on Japan’s intervention to stop the appreciation of its currency. USD/JPY climbed above the 87.50 level.
Gold continued to make headlines as it climbed to a new record once again. The yellow metal reached $1216 as investors turn to Gold looking for a hedge against inflation and a weakening Dollar. Silver advanced as well surpassing $19.45. Crude Oil dropped below $77 as the EIA Crude Oil Stocks report showed that stockpiles unexpectedly rose 2.1 million barrels last week.
The Day Ahead
The day will start with Australian Retail Sales and New Zealand’s ANZ Commodity Price, but the market’s attention will be focused on the European session. For the Euro-zone’s GDP, estimates point to an expansion of 0.4% in the third quarter. The ECB is expected to leave interest rates at 1% and Trichet’s speech will be closely followed as rumors circling the market suggest that the ECB may announce a reduction to its emergency lending. Retail Sales and PMI Services are also due for release in the EU in a session with expected volatility for the Euro. In the US, Jobless Claims are forecasted to rise to 480K from 466K the previous week and the ISM Non-Manufacturing is likely to climb to 51.5 from 50.6 the month before.
AUD/JPY recently made a sharp correction from 82, briefly touching the 76.50 support level, to make a quick comeback to the 82 area riding on fresh bullish momentum. The next sessions should be closely watched for trading opportunities. A close above 82 could be the signal to enter a Long position, where a failed break attempt could encourage the bears to drag the cross back downwards.
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Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.