Forex EUR/USD commentary February 3, 2012
Happy NFP day everyone. Pretty much as I expected yesterday was fairly muted and the Euro was in a 50 pip range until the Chinese stepped in and said they are looking at dumping cash into the ESM and EFSM to help the Euro Zone. However that 50 pip spike was quickly squashed by none other than the Chinese if you heard the “market talk” going over the news sources. I guess if they do drop them some cash they want to get the best price on their Euros since the floor is more likely to fall out from underneath it rather than it somehow get a lift but I will admit stranger things have happened. Having said that the Chinese are really in the same boat as Germany and do want to see that the weaker EZ countries are getting their ducks in a row before they go throwing money into a bottomless pit. It is in China’s best interest to help the EZ since they are the 2nd largest importer of Chinese goods but if the Euro is going to fail then why would they take the risk when they have already but forth a lot of cash and taken some stiff losses as result.
The other main news releases today are the EZ retail sales and is expected to rise modestly and at least be a positive number rather than a decline like last month. As long as it comes out as expected then there is still a chance the EZ as a whole may avoid recession but that is only one source of economic data that is considered so even if the numbers are better than expected the reaction will most likely be muted being NFP day. The unemployment numbers from the US will also be watched close. An uptick in the rate will be a hit to risk and equities will fall along with the Euro unless there is a big surprise to the upside with NFP. If that happens then the conflict may be ignored depending on the size of the surprise. However with all the news of companies cutting jobs lately its unlikely that a we will get a significant surprise to the upside. It may be more likely that were in for a surprise lower. I expect it to be a quiet day until the releases.
Be careful today guys