Data from the U.S. was disappointing on Thursday as the Flash Manufacturing PMI and New Home Sales both missed their marks badly. On top of that the previous month’s New Home Sales was revised downward. The States will publish Core Durable Good statistics today and it may prove a good barometer for things to come from the American economy.
With yesterday’s data coming in below expectations from the U.S. yesterday, investors are essentially being set up for a game of ‘who do you trust?’. This as the Fed and U.S. administration in the White House continues to softly whisper sweet nothings into the ear of the American public telling them all will be well. But the proof has not been in the pudding and Digital Markets Advisor remains sceptical about the U.S. economy in the coming months.
Meaning that although the EUR has been slouching near short-term support levels, the Single Currency does have enough room above it per once travelled short-term values to tempt traders who are looking to go long. Yesterday’s French Manufacturing Flash PMI came in worse than expected and was definitely within recession realms. The German number was only slightly better than predicted. Thus the ECB and Fed will continue to find themselves in an unwanted dance together as both spheres, the European Union and the States, try to keep their respective currencies on the weaker side. But here’s the thing, both the Single Currency and Greenback cannot be weak at the same time – at least for the foreseeable future. Meaning one has to remain weaker than the other and we expect the USD to be the weaker of the two in the near futured.
Also worthy of note, the German Ifo Business Climate reading will be released today. Combined with the already mentioned Core Durable Goods numbers coming from the States, the data reports could lay the groundwork for a very interesting day of trading going into the weekend.
And the data does not stop there today, for Sterling fans, traders need to be aware that the Preliminary GDP figures will come from the U.K., the GBP has continued to lose some value to the USD and this sets up the table for what could be a meaningful week of trading to come in the FX markets as both Sterling and the Single Currency have recently lost value to the USD.
Which brings up risk appetite. Geo-politics have not been particularly kind the past couple of weeks and investors who gear themselves towards sentiment being generated from international affairs are likely to feel a pain in their stomach regarding unknowns. Investors like to know all things are stable so commerce (meaning global business) can move forward productively. And the questions being raised because of the problems with the Ukraine and Russian followed by news from the Middle East isn’t allowing many to rest. Decreased risk appetite typically does mean a stronger USD. So what traders need to ask is how long will worry outweigh risk?
Gold as of this morning continues to slope towards the weaker side of its value. The precious metal is near 1293.00 USD as of this writing.
Data will be important today which could bring some opportunistic trades in FX.