The New Year market optimism has completely been erased by the euro zone debt crisis concerns as the dollar strengthened across the board yesterday. EUR/USD opened at 1.2942 and dropped to a 16 month low as it traded at 1.2770. It shed over 170 pips reflecting investors’ lack of confidence in the euro and the positive ADP jobs data announced by the US yesterday. France sold long term bonds yesterday after Germany had done the same on Wednesday; the results did little to encourage confidence in the euro despite the lower cost of borrowing incurred by the two countries. The currency pair opened this morning at 1.2787 and has continued to decline to 1.2763. Monti and Sarkozy are scheduled to meet today in France. France is still at risk of being hit with a possible credit rating downgrade. Sarkozy is also scheduled to meet with Merkel next week to discuss budget disciple although many investors doubt that this will be enough to pull the euro back up. Today’s main focus is on the Non-Farm Payroll Data (NFP) although analysts feel that the euro debt crisis concerns are likely to shadow positive results for the NFP.
GBP/USD: Sterling briefly rose against the dollar yesterday as it opened at 1.5618 and reached a high of 1.5628 due to positive UK Service PMI data. The move was short lived as dollar buying spread across the markets forcing GBP/USD down to 1.5467. The US ADP jobs data yesterday together with the soggy market sentiment caused by the French bond sale were the main causes of the sterling’s devaluation against the dollar. The currency pair opened this morning at 1.5493 and has been trading a 30 pip range around the open price. The UK economy has been showing signs of progress and could lead to lower expectations for further quantitative easing. This would then help strengthen the sterling. For today, investors will be waiting for the UK Halifax data and the NFP data from the US, although most traders feel that the data may have little impact on GBP/USD movements due to the worsening euro zone debt crisis.
USD/JPY: The yen weakened against the dollar yesterday much to the advantage of Japanese exporters. The USD/JPY opened at 76.70 on Thursday and traded sideways throughout the Asian session before it rallied up to 77.23. The US ADP jobs data along with the markets search for safer investments helped boost dollar buying. It opened this morning at 77.10 and has managed to maintain its gains from yesterday as it trades higher at 77.25. Hopefully this may help the Japanese government avoid further market intervention to help weaken their countries currency. As with the other major currency pairs, traders focus for today will be on the NFP data from the US and any updates from Monti and Sarkozy’s meeting in France today.
USD/CHF: Opened at 0.9415 and mainly traded sideways through the Asian session. As the European markets opened and the markets called for the Swiss National Bank’s (SNB) Chairman to step down the Swiss franc began to tumble as the currency pair surged up to 0.9535 in the New York session. The SNB Chairman, Hildebrand, has been accused of impropriety trading in the forex markets, which led to the weakness in the franc. Hildebrand refused to step down during his speech yesterday. The currency pair opened this morning at 0.9522and has continued to rise reaching a high of 0.9543. Swiss CPI data is expected today along with the NFP data for the US, which are likely to impact the currency pair’s movements.
Commodities
Oil: Opened at 103.22 on Thursday morning and traded back and forth between 102.20 and 103.70 as investors’ uncertainty overtook the markets. The euro zone debt crisis concerns along with the intensifying situation between Iran and the West pulled the oil prices in different directions. It ended the day by dropping 210 pips down to 101.30 due to the deteriorating global economic outlook brought on by the euro zone debt crisis. It opened this morning at 101.30 and traded a 35 pip range above the open. Currently it is trading slightly higher at 101.80 as the markets await the NFP data for the US to give them some idea of the economic health of the US economy.
Gold: Was able to remain somewhat stable yesterday despite the collapse of the euro. The precious metal traded at 1612 when markets opened on Thursday morning and initially climbed up to 1625. By the time the US markets opened it had lost its gains and dropped below the open to 1596 on the back of investors’ interest in the safe haven dollar. It was able to regain its strength as it climbed back above the open and started today’s trading session at 1620. It rose up to 1627, but has once again started to decline to 1620. Investors continue to remain uncertain about the global economic outlook as no resolution for the euro zone debt crisis is on the horizon. NFP data today is likely to give investors some direction and may impact the bullions price.