Daily Forex Analysis by Finexo.com 03/02/2010

Previous sessions
US Dec Pending Home sales out at +1.0% m/m, as expected vs. revised -16.4% prior
GBP Nationwide Consumer confidence out at 73 versus expected 70 vs. 70 prior
AUD Dec. Trade Balance out at -2.25B versus expected -2.36B and prior -1.73B

Upcoming Sessions
• GBP Services PMI (930GMT)
• EUR Retail Sales PMI (1000GMT)
• USD ADP Non-Farm Employment Change (1315 GMT)
• USD ISM Non-Manufacturing PMI (1500GMT)

Important reports to watch for this week:
• USD Non-Farm Payroll Change ( Friday 1330GMT)
• USD Unemployment rate (Friday 1330GMT)
• EUR minimum Bid rate ( Thursday 1245GMT)
• GBP Official Bank rate (Thursday 1200 GMT)

Market Review:
The U.S dollar slipped further away from its six month high against the Euro, as concerns began to ease over Greece’s debt. The EUR managed to keep a firm hand, on overnight gains, reaching $1.36969 (increasing 0.18% versus the USD) in the Asian Markets early this morning. However, the Euro continues to face a tough battle, as investors continue to remain skeptical over Greece’s, and now Portugal’s, financial problems.

Whether the Euro manages to hold on to this morning’s gain against the US dollar is yet to be seen- as both the EU and US are set to release two pivotal reports later this week (EUR minimum bid rate, USD Non-Farm Payroll Change). Tomorrow (1245GMT), the European Central Bank will announce its minimum bid rate- Jean Claude-Trichet, the president of the ECB, is predicted to leave the overnight Interest rates unchanged at 1.0%. Unemployment in the European Union has skyrocketed to 10%, while the recovery from the recession is still wavering- the decision to keep the rate low will hopefully give the EU a stronger push towards economic recovery.

Later today (1315GMT), the US will release its ADP Non-Farm Payrolls, apredictor index for Friday’s widely anticipated Change Non-Farm Payroll. The index is predicting a further decrease in the number of employed people by 31K; a substantially smaller decrease than last month’s fall of 84K. Also today, the US will release it ISM Non-manufacturing PMI expected to come in at 51.1, versus a prior level of 49.8 in December. A reading of above 50 signifies growth, indicating that service industries in the U.S are expected have expanded in January.

This morning the Asian market saw an increase in the GBP, as the sterling rose following news that the UK consumer confidence improved in January coming in better than expected and increasing 3 points from the previous month. The Pound advanced against 15 of its 16 major counterparts following news that that consumer sentiments were improving. Following the release of the index, the British currency rose to $1.6027 (6:40 GMT) from $1.5973 in at closing in New York yesterday.
Britain managed to return to economic growth in the Q4 of 2009, as both housing prices and unemployment began to decline. However, this small increase in the Pound could easily be lost.

Tomorrow, the Bank of England will announce the Official Bank Rate- the Monetary Policy Committee is expected to leave its key interest rate unchanged at the record low level of 0.5%. Moreover, the BoE is expected to call an end to its radical policy of pumping out new money after Britain narrowly emerged from the recession in the last quarter of 2009. Introduced almost one year ago by the Bank of England, this extreme policy’s objective was to encourage commercial banks to increase lending to both businesses as well as individuals.

Australia’s trade deficit continued to widen last December, as imports of goods such as gasoline and oil reached 2 year high – further adding evidence to the economic recovery. Imports rose 6% last December, the biggest monthly gain since May of 2008 (oil and gasoline imports jumped 26%, while gold imports swelled a record 51%). Following yesterday’s decrease of 1.4% against the USD (due to the unchanged overnight rate), news of the increased trade deficit, caused the Aussie to continue to fall against the greenback- dropping from 88.7 U.S cents to 88.64 U.S cents after the announcement.

The fate of the AUD is still up in the air, as tomorrow (0030GMT) the Australian Bureau of Statistics will release its monthly Building Approval, expected to fall 0.2% versus prior increase of 5.9%, and its Retail Sales, expected to increase slightly by 0.3% versus prior reported increase of 1.4%. The RBA’s decision yesterday to keep the interest rate unchanged at 3.75% sent the Aussie on downwards spiral. If these two reports come in better than expected the Aussie could potential regain some of yesterday’s and today’s losses.

Written by Finexo.com