The ECB surprised few when it raised its interest rate on Thursday by a quarter of a point. The rate increase will be debated regarding as to why it occurred. On the surface the ECB will certainly claim that the change in monetary policy is being enacted because of inflation pressure. It will be up to investors to now decide on how they approach the EUR with its 1.50% interest rate compared to the GBP and USD which have near zero interest rate polices. The EUR slipped in value against the USD yesterday even as the rate increase was made a fact. This shows that investors had largely digested the change in policy already into the EUR. The question now is how the Single Currency will react to the existing shadows from the European debt crisis that is not about to go away.
Thursday had the ECB and EUR in focus. Today the center of attention becomes the States with the Non Farm Employment Change data. The unemployment problem in the U.S. is problematic when compared to historical numbers. The American public still is displaying a lack of confidence which is affecting consumer spending. The jobless report today is expected to have a result of 97k jobs gained. Yesterday’s ADP report was better than expected and this sets a nervous table for investors. Wall Street turned in a positive session on Thursday and the question is where the pendulum will sway after the jobless numbers are seen. Sentiment has been cautious among traders for nearly a month. The Forex and Commodities markets have seen volatility no doubt, but at the end of the day it is clear that many financial assets remain locked in ranges even if they have been under stress.
The GBP saw no significant movement as the BoE kept its monetary policy firmly in place. Manufacturing Production numbers were better than expected from the U.K. on Thursday, but Industrial Production was not as strong as the estimate. PPI Input and Output data will be published today. However, the Sterling like many other currencies may be locked into a rather cautious pattern as traders await the results from the Non Farm Employment Change results from the States. The GBP has continued to trend slightly weaker under the shadows of a less than optimistic outlook for the U.K. economy.
Gold prices maintained their strength on Thursday and the precious metal is around 1531.00 USD as of this morning’s writing. Other commodities turned in mixed performances. The AUD stayed near its highs yesterday. The Australian currency remains interesting as Gold finds backing because of risk adverse trading, even as the global economic picture is becoming murkier. The JPY lost some ground to the USD and it will be up to traders to test its range short term. The JPY has consistently fought its way back to the stronger parts of its value against the Greenback and until proven otherwise traders are likely to test its waters.
Going into the weekend investors may prove rather tentative until they see the outcome of the jobless numbers from the States. Trading may be rather mixed until answers come from the States regarding its economic prowess. The data from the U.S. has disappointed investors for a couple of months, if today’s Non Farm Employment Change numbers prove better than expected this could set off a short term summer rally in equities.
Written by bforex.com