The risk rally has juddered to a halt overnight, in spite of China’s manufacturing PMI coming out at a better than expected 50.5 (consensus 49.6, prior 50.3). The main beneficiary of the news in the currency space was AUD which enjoyed a temporary uptick, but overall the trend has been a renewed demand for dollars and loss of appetite for risk currencies. EURUSD started to lose upside momentum yesterday around the time that Eurozone unemployment data was released; revealing that, as expected, the jobless percentage within the Euro bloc hit a record high 10.4% in December (up from 10.3% in the month prior). The sell-off in EURUSD accelerated throughout the afternoon, and as such we start today almost 200 pips lower than yesterday’s highs.
Part of the reason for the euro collapse has been attributed to reports that Greece may be resisting new austerity measures to bring their troublesome debt down to sustainable levels. This is certainly a worrying sign that Greece is reaching is growing fatigued when it comes to spending cuts and tax hikes, and sooner or later we may reach the exhaustion point where the distaste for further painful austerity outweighs the appeal of being a part of the Eurozone anymore.
Ahead today, Switzerland releases its December retail sales before a swathe of European PMI manufacturing surveys over the course of the morning. On the whole, markets are expecting today’s manufacturing surveys to be broadly in line with last month’s readings, if not a little better. There will also be the release of the Eurozone January CPI estimate. The US session is peppered with significant data events today, starting with the release of the latest ADP employment change which will likely influence expectations ahead of Friday’s important non-farm payrolls. Expectations are looking for a solid gain of 182k jobs in January, down from December’s stellar 325k print. Later in the afternoon we will get the ISM manufacturing report and US construction spending.
Part of the reason for the euro collapse has been attributed to reports that Greece may be resisting new austerity measures to bring their troublesome debt down to sustainable levels. This is certainly a worrying sign that Greece is reaching is growing fatigued when it comes to spending cuts and tax hikes, and sooner or later we may reach the exhaustion point where the distaste for further painful austerity outweighs the appeal of being a part of the Eurozone anymore.
Ahead today, Switzerland releases its December retail sales before a swathe of European PMI manufacturing surveys over the course of the morning. On the whole, markets are expecting today’s manufacturing surveys to be broadly in line with last month’s readings, if not a little better. There will also be the release of the Eurozone January CPI estimate. The US session is peppered with significant data events today, starting with the release of the latest ADP employment change which will likely influence expectations ahead of Friday’s important non-farm payrolls. Expectations are looking for a solid gain of 182k jobs in January, down from December’s stellar 325k print. Later in the afternoon we will get the ISM manufacturing report and US construction spending.
By
M.Zohaib Gadit
Forex Trading Consultant
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