As if taken over by Zombies the FX market is seeing risk appetite increase since the publication of the Non-Farm Employment Change numbers from the States on Friday. The statistics from the States were bad, jobs gains while not dead were certainly lifeless, but this has invigorated not only FX but equities. Why? Because bad is good.
The zombie like results from the jobless claims have produced yet again an environment in which investors believe that a Federal Reserve that has a rope around its neck will have to be cautious and much less aggressive with it any tapering. Meaning that the Fed is now expected to keep its current stance and maintain the status quo well into 2014. Data from the U.S., Europe, and China all remain quite lacklustre and investors see this as an opportunity to take advantage of cheap money that they believe will continue to pour through the Central Bank faucets. How long this sentiment will continue however is more than questionable.
The gains made in the equity markets on Friday while good on Wall Street and alright thus far on the Nikkei today have not been enough to erase the losses from the previous days. So short-term sentiment will have to be gauged carefully. One good day of trading, a few days, in fact a few weeks of results will not make the broad markets any less dangerous when it comes to valuations and trading psychology. The element that makes Friday’s jobless data so dangerous is how it is being interpreted. On one hand there is on the surface an improving Official Unemployment Rate and on the other hand it is obvious that not enough jobs are being added to the American economy. In a world in which perceptions often take precedent investors will have to decide on an Unemployment Rate that looks better against the knowledge that the reason the percentage of official jobless seekers is improving is because so many Americans have simply given up looking for work.
The EUR has traded slightly weaker this morning. But this comes after gaining on Friday after the jobs numbers from the States. The GBP has also given back some of its Friday profits. The JPY has traded slightly stronger in the Asian sessions this morning. And the AUD has traded weaker. Forex is performing an awkward dance this morning and appears to be waiting for answers about which direction it should traverse after the economic data that has left it without any roadmaps except known ranges that will certainly be tested throughout the week via support and resistance ratios.
French Industrial Production will be released shortly and will be followed by the Italian numbers. Late tonight China will publish Trade Balance results.