20:00 GMT (Global-View.com) Aug 19, 2010 Thursday was a bad day for economic data out of the U.S. We tend to watch weekly jobless claims more intently than any other data release, not because of its accuracy, but because of its frequency. We do not hang on each individual release, but look for general patterns in recent data. After flat lining for the first 7-1/2 months of the year, the latest data turned south, meaning that new jobless claims spiked higher. The Philly Fed index was much weaker than expected as well.
Despite the data, the EUR is trading lower vs. the USD and is mostly weaker on its key spots. One concern being bandied about today is concern about Greece. The impact of austerity in Greece on civil society is a major worry. In the end we figure that Greece will need a currency devaluation against the EUR, but we are unclear about the mechanism by which such an adjustment might take place. Either you are in the EUR scheme or you are not.
Another key focus is the Saturday election in Australia. The main issue is the mining tax. The Labor Party is saying a victory would be a mandate for the tax. Most outside observers feel the tax is ill-conceived. Worry about the risk of a Labor government has weighed on the AUD this week. Also there are concerns about how the leverage on the possible BHP takeover of Potash would impact the financial stability of BHP.
The USDJPY tested below 85.00 again today on U.S. data, but did not remain there. The pair is back hoverig above the psychological 85.00 line. The Kan government continues to fret about the value of the currency. Implied intervention warnings are being delivered daily. Discussions in Tokyo about yet another stimulus package from Japan continue. The strong JPY is not helping things much. Weaker than expected Japanese GDP has the Kan government worried
UPCOMING DATA HIGHLIGHTS:The Far East will see no major releases on Friday. In Europe , no key are due. In North America , Canadian CPI data are awaited.
The EURUSD is lower on the day and the GBPUSD is steady. The EURGBP cross is down. Traders still watch the European sovereign debt situation.
In the GBP, the U.K. new government is politically vulnerable.
The USDCHF is lower and EURCHF is lower. The SNB strong stand in supporting the EUR against the CHF has waned after massive FX losses.. Flows out of the EUR into the CHF remain an issue for the SNB. The SNB announced that 1H10 forex losses fell to CHF 2.8bln from CHF 4.0bln in 1Q10.
The USDJPY is back steady and the EURJPY cross is weaker. While Japanese public finances are a mess, analysts point out that most JGBs are owned by Japanese, so Japan is not dependent on foreign investment. The government has been pressed the BOJ to promote growth and favors a lower exchange rate.
Some traders focus intently on the Japan vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).
The risk trade continues to be turned on and off almost daily. As for the commodity currencies (CAD, AUD and NZD), they are weaker vs. the USD. The Bank of Canada recently hiked interest rates by 25bps. The BOC sent mixed signals afterwards. A strong CAD eases the pressure on the Bank of Canada to tighten. In Australia, the RBA is unlikely to tighten in September. A key election looms for Saturday. The RBNZ is now in a reduced tightening mode. Oil and gold are mixed. Gold is still favored as a refuge from paper money.
EQUITIES & INTEREST RATES
Equities and Bonds are also risk trades. Far East equities closed higher. European bourses were down. U.S. equities are lower. The U.S. 10-yr was last 2.57%, -7 bps.
Bonds are a counter to risk trades because risk investments must be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades such as equities falls.
See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author and co-founder and partner of Global-View.com. Prior to Global-View.com, he was a forex trader and a private-label forex analyst for a top Fed watching service in NYC. He has been a corporate forex advisor and also worked in international liability management for a major N.Y. money center bank. John holds an MBA from the University of California at Berkeley and a B.A. in International Economics from that school.
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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