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Market Review:
Euro, Cable, Aussie Under Review
In a daily market review with TheLFB trade team, Dan Cook, Snr Market Analyst at IG Markets, looks at the potential in two European and one Asian based currency pair. Catch Dan, and TheLFB trade team on ForexTV Live.
EUR/USD – After a rapid drop overnight to around the 1.4280 level, the euro has snatched back some upward momentum as investors seemed to feel the plunge was a bit of an overshoot. After gaining through the early morning U.S. hours, the euro did meet with some headwinds as Euro-zone Industrial New Orders fell by 2.2%. This number was expected to come out negative, however, not to that level.
The euro and dollar traded bouts of strength following a better than previous, but not as good as expected ADP Non-farm employment figure which showed the U.S. economy shed 84K jobs in December. Since the release of the ISM Non-Manufacturing figures the initial reaction has been all euro strength. While the headline number of 50.1 did show economic expansion, following a very positive Manufacturing reading on Monday, it seems the market priced in the expectation of a much better result.
GBP/USD – The price action in sterling and dollar has seemed to mimic the overall feeling in the markets over the previous session. Effectively, this pair is unchanged since the previous U.S. trading session as investors question which direction they should commit to. Services PMI in the U.K. did little to answer any questions, showing an improvement of a mere 0.2 to come in at 56.8. The Pound is recovering strongly after the US Non-Manufacturing data.
While 50.1 is much improved over last month’s shock reading of 48.7 which showed contraction, and reading through the report there was not too much to be optimistic about. Tomorrow the U.K. Monetary Policy Committee will be releasing their Official Bank Rate and Monetary Policy decision. While there is no change expected for either rates or the amount of quantitative easing, it will most likely be tough for traders to commit too strongly in one direction before this release tomorrow.
AUD/USD – The aussie is continuing its rally,, breaking clean through yesterday’s high of .9175. Helping the AUD was an Australian Building Approvals figure that shot up from a contraction of 1.8% the month prior to a growth figure of 5.9% in November. This data helped commodities such as gold, and particularly copper, to keep the upward momentum which has been pushing the aussie higher.
In the U.S., the headline number of the ISM Non-Manufacturing was much improved, but the overall report as mentioned above, did not provide a lot of factors to be optimistic about. Actually, the only major increase pushing the reading higher this month was a 4.8% jump in prices. Business Activity/Production and New Orders both contracted by 5.6% and 0.5%, respectively. Adding to dollar, and broader US economic woes, was an employment reading that while slightly improved (0.5%), still remains at abysmal levels.