Forex Blog

January 6, 2012

Employment Friday Causes Volatility In Loonie (CAD)!

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 7:23 am

“Jobs Friday” can be one of the most volatile trading days of the month and this morning it certainly lived up to that billing, especially for the Canadian dollar (AKA Loonie).  Not only were the markets to be affected as a whole with the US Non-Farm Payrolls report (see today’s top story for that discussion) but also earlier in the morning Canada released their own employment report.

The headline out of Canada was that the unemployment rate ticked higher to 7.5% from an expected 7.4% expectation so the Loonie sold off an hour before the US NFP!  So many in the market were of the belief that a better than expected NFP figure would be good for risk appetite and that the Loonie might reverse as a result.

The NFP number did in fact come in better than expected, showing a gain of 200K.  This has been good for stocks and commodities but it has also been driving the US dollar higher!  This is a break from the usual expectation and correlations that we might normally expect as risk appetite is usually US dollar negative. So it looks like these correlations may be breaking down a bit but is is likely that the Loonie will close around 1.02 vs. USD.

US Unemployment Falls to 8.5%

Filed under: OANDA News — Tags: , , , , , , , , , , , , , , — admin @ 7:10 am

200,000 jobs were added to the U.S. economy in December pushing the unemployment rate to 8.5 percent to reach the lowest rate in almost three years.
The 200,000 increase followed a revised 100,000 rise in November that was smaller than first estimated, Labor Department figures showed in Washington.

“The tide is beginning to come back in,” James Glassman, senior economist at JP Morgan Chase & Co. in New York, said in a radio interview. “We’ve got a long way to go. This is all positive, though, that we’re actually moving forward, and that’s an important trend.”

Source: Bloomberg

January 4, 2012

Forex Market Outlook 1/4/12

Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 7:27 am

Well we knew it couldn’t be that easy and yesterday’s move to the upside for risk appetite has been quelled slightly this morning.  In other words, we are pulling back from the highs as the market has taken its foot off of the gas—for now.   This is not surprising as there will likely be volatility as the market digests new information and decides which way it wants to go to start the year.  There is seemingly to me a bias to the upside, so that gains can be booked early as the year unfolds.

There are two basic economic stories that we are following this year: the Euro debt crisis and global growth.  Global growth can be measured by the scheduled economic releases we receive on a daily basis, but the Euro debt crisis is going to be more prolonged and will be more market-driven so will be much harder to gauge.

That is what we are seeing this morning after a German bond auction came in with slightly lower demand than average, and the EFSF plans to auction off bonds tomorrow to help support the bailouts.  In the meantime, consumer spending in France declined as higher unemployment created uncertainty.  The Euro zone CPI estimate was lowered from 3% to 2.8%, which may give the ECB some room to potentially cut interest rates again.

And this is going to be the issue all year long.  Essentially the ECB and the various bailout funds are in a race against time to get debt refunded before interest rates move too high to make the debt service impossible.  This is why the markets were so disappointed last year with the lack of solutions coming out of the EU as while nearly everyone enjoyed the benefits of the union, no one wants to help out when the chips are down.

If the Euro zone leaders came out with a “bazooka-like” program like the one here in the US when we had our banking crisis, then the bond vigilantes would be too scared to force higher yields.  But the lack of conviction in the EU has allowed the market to control where rates are going and this is potentially disastrous for the debt-laden countries.

So the debt crisis will likely be the elephant in the room for some time until something comes to a head, which may not be great for global economic hegemony.  There is an overwhelming feeling that the Euro zone will slide into recession at some point this year and the impact on the overall global economy is unknown.

In the short-run, the economic data continues to come in better than expected which is positive but highly uncertain if this is a trend reversal or merely just a blip.  One of the catalysts for this improvement has been easy monetary policy from Central banks around the globe, most notably from the US Fed.

Yesterday, the minutes from the most recent FOMC meeting were released and the push for further “transparency” was made.  We learned two basic things from the release yesterday, the first being that the Fed is now going to release its forecast for the Fed funds rate which is basically going to take some the impact away from the actual FOMC rate decision by essentially telling us exactly what they are thinking.  It will be interesting to see if that pre-announcement induces the same sort of volatility that the actual announcement does.  The second thing we learned is that some members of the committee are still favoring further monetary easing if appropriate, which given recent history could mean throwing additional money at the slightest perceived economic downturn.

Later this morning US factory orders are expected to rise 1.9% to four-month highs.  This is definitely possible after yesterday’s ISM manufacturing numbers came in better than expected.  So the data is improving and Friday’s NFP number may also surprise to the upside, though I discussed the fallibility of the January figure in yesterday’s article.

A familiar pattern is starting to emerge, with risk appetite starting out early in the year and then the hope that the markets can hold on to gains as the year unfolds.  There will be many turns and bumps along the road this year for certain, so it is important to stay on top of the market moving news that can affect global economic sentiment.

January 3, 2012

Forex Market Outlook 1/3/12

Filed under: Forex News — Tags: , , , , , , , , , — admin @ 6:08 am

Buy Buy Buy!  At least that’s how the New Year is starting out, as the markets are decidedly risk-taking mode after the shortened holiday trading sessions.  Global financial markets are set to open higher, led by stocks and commodities.  The fact that markets couldn’t rally higher to end the year may bode well for the start of 2012, but will it continue throughout the year?

The short answer is not likely, but I will say that economic conditions appear to be improving albeit slowly and there is still great global risk emanating from the Euro debt crisis.  There is also bound to be further political unrest around the globe, and already it has started with Iran who had new economic sanctions imposed upon them by the US over the weekend.  This has caused them to increase their threats of shutting down the Straits of Hormuz, which is a major conduit for global oil supplies.  This has caused oil prices to shoot up here in the US and it is now trading close to $101.50.  Should this situation continue to escalate, we could see much higher oil prices which could have a major affect on inflation.

However the markets are reacting more favorably to positive economic data that has been released so far this morning and looking forward to data here in the US late this morning.

Here’s what we have so far.  Chinese Non-Manufacturing PMI data came in much better than expected, posting a gain of 56 vs. last month’s 49.7.  Recall that anything over ‘50’ means expansion, below means contraction so this was seen as a big plus for the Chinese economy.  This has helped push the Aussie and the Kiwi higher to 3-week highs and the Aussie also was buoyed by its own manufacturing data that also showed expansion vs. last month’s contraction.

This kicked off risk appetite that then followed through to the European session as Germany reported a much better than expected employment report.  Unemployment fell by 22K vs. an expectation of 10K and the unemployment rate fell to 6.8% from 6.9%.  This is also a positive as the Euro zone needs Germany to continue to thrive in light of the other issues surrounding the region.  The debt crisis is going to continue to be the major headwind in the market and I would not be surprised if the Euro zone looked different by the end of the year.  Whether or not Greece will leave the economic union will be a major question that will likely need to be answered some time soon.

But for now the markets are content to push higher and meeting between Sarkozy and Merkel next week may provide more clarity on what the expectations are for members going forward.

In the UK, PMI figures came in better than expected at 49.6 vs. an expectation of 47.3, but they were not able to eclipse the magic ‘50’ number to show expansion.  This was however seen as a major positive and both the Pound and UK stocks have traded higher.

Later this morning we are expecting the US ISM manufacturing figures, which are expected to show expansion in the 53-range.  The market has high hopes for the US economy as the data appears on the surface to be improving so we may find ourselves in a situation where the market now expects the data to beat the expectation.

This Friday will also bring the Non-Farm Payrolls (NFP) report which will show how many jobs the US economy has added.  Right now the expectation is for 150K, but my guess is that the market may be expecting closer to 200K as we near the end of the week.

One of the “problems” however with the data we are seeing now has a lot to do with holidays and the change of the fiscal year.  This can cause outliers and exaggerated figures, which may not be indicative of the “real” health of the economy.  For example, sometimes seasonal hiring and reclassifications can show distorted NFP figures in January so some economists don’t put much emphasis on them.  That’s not to say that the markets won’t though as we almost always get major volatility from Friday’s release.

There is also a thought that the better than expected manufacturing numbers we are seeing could be a function of companies replenishing inventories as they get rid of last year’s merchandise to make room for the new.  With the better than expected shopping figures from the holiday’s last month, I will be keeping an eye on retail sales figures to start the year to see if the consumer is suffering from exhaustion.

So essentially not much has changed from the end of last year, though with the start of this New Year there is seemingly a sense of optimism that things can get better.  Last year was interesting to note that US stocks finished the year flat, yet the Japanese yen was the best performing currency. The latter would normally suggest risk aversion so it’s a credit to US stocks that they were able to hold levels.  In other words, stocks could have been much higher without the Euro debt crisis keeping risk at a premium.

There is much to be excited about for 2012 and today’s action is a god start.  But let’s not get ahead of ourselves just yet, as this could be a long year.

December 6, 2011

AUD and CAD take different routes

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 11:58 am

Governor Carney did what was expected and kept Canadian rates on hold (+1%) this morning. The accompanying statement was a tad surprising, less dovish than expected. The fact that the Bank mentioned that there was “considerable monetary policy stimuli” in place, coupled with policy makers noting that CPI would run a tad higher than forecast and that they see US growth “slightly more robust than foreseen’ has helped the CAD to outperform most of the other major currencies today.

Fixed Income traders have trimmed future rate expectations. They had almost fully priced in a -25bps rate cut by next June, but this has been pared to +80% after the Bank stood pat and sounded less dovish than expected. Another reason for the firmer tone for the currency is the underlying story of the CAD in demand for safe-haven flows in light of AAA rated countries elsewhere under pressure from S&P. Canada is seen as an investor’s refuge from the Euro crisis without the risk of US budget deficit and political deadlock. The loonie has been the best performer in the past month outright amongst the most-traded currencies. It’s expected that Carney will be the only central bank leader in the G10 to raise interest rates next year. This is on the back of inflation having exceeded the Bank’s+2% target for eleven-months as the economy grows at double the pace of the G-7 nations.

Other data handily beat market expectations. Canadian Ivey PMI was at 59.9 seasonally adjusted last month vs. 54.4, indicating that purchasing activity has again expanded. Disappointing however was the sub-category employment index print of 49.4, indicating that employment was lower than in the previous month. Last week, Canada reported losing -18.6k jobs in October and the unemployment rate ticking up to +7.4%.

Over the past few sessions the loonie remains handcuffed to EUR headlines, tightly trading in its own range. Currently, the currency seems well supported above 1.0220 and with resistance below 1.0100. Expect the currency to trade close to this range until the market gets a clearer picture of Euro intention by weeks end.


Loonie

Service Sector Suffering Due to Dollar Weakness

Filed under: OANDA News, Uncategorized — Tags: , , , , , , , , , , , , — admin @ 7:12 am

By Paul Quintaro

The ISM Non-Manufacturing Composite for the month of November printed at 52.0 Monday, down from the prior reading of 52.9 and well below expectations of 53.8. The reading is a broad-based assessment of the state of the service sector in the US.

Of its subcategories, the reading for employment came in below 50—indicating a contraction. This contrasts with last week’s employment data, which indicated that the unemployment rate in the US had fallen below 9%.

Of course, this data may fit in with the recent growth in manufacturing seen in the US, perhaps on account of currency fluctuations.

As the US dollar has weakened against other currencies, exports in the US may have benefited while individuals’ consumption may have taken a hit. A weaker dollar means less purchasing power for US consumers, and therefore the money they have to spend on services may be restricted.

For its part, manufacturing has been seen to be enjoying somewhat of resurgence, as US car manufacturers have demonstrated new life in recent improving sales figures.

The dollar index traded down earlier Monday, dropping roughly 0.5%. The primary cause of the shift in the index may have been a strengthening of the euro against the dollar, as the EUR/USD pair moved up nearly 0.60%.
Forex traders may have had their concerns alleviated about a possible euro collapse.

In recent months, more and more concern has built up over the fate of the euro. In a joint press conference on Monday, Germany and France’s leaders—Angela Merkel and Nicolas Sarkozy—came together to state that they had come to an agreement on a new treaty for the European Union.

That new agreement would not include Eurobonds, but would include measures to ensure that member states kept their budgets in check. It could also make changes that would allow the European Central Bank to purchase the bonds of indebted member states.
Of course, in a somewhat ironic fashion, a stronger euro may prove to be fatal for the Eurozone.

A strengthening euro means that the debt burden of member states is made heavier. As the member states are struggling under their current debt burdens, a stronger euro would only make their situation worse, as well-known economist Nouriel Roubini noted last week.

Still, if the ECB is now going to purchase bonds, it may drive the euro lower. With more euros in circulation, the value of the euro may be made weaker.
Other central bankers could resist euro depreciation. The Swiss National Bank and Bank of Japan have already taken steps earlier in the year to drive down the value of their currencies, as investors may have shifted their holdings to shield themselves from a loss.

It will be interesting to see where the euro trades from here. Should a new agreement be formed, two conflicting forces—weakening due to bond purchases, but also strengthening due to relief about the potential of a collapse—could whipsaw the euro. If a new agreement cannot be formed, and the situation continues to deteriorate, the euro could continue to trade lower.

December 2, 2011

US unemployment rate drops for all the wrong reasons

Filed under: OANDA News — Tags: , , , , , , , , , , , , , , — admin @ 10:30 am

North American employment reports came, we saw and they have been trying to conquer the risk trade ever since. It certainly was a mixed bag of data to end ‘this’ of all weeks on. Canada did a U-turn, and provided us with as many job losses (-18.7k) as positives (+18.6k) the market had been expecting. Unlike its southern neighbor, the unemployment rate inched higher (+7.4%). In contrast, the US hit headline expectations (+120K) and gave us some strong positive revisions. The unemployment rate firmly beat everyones expectations (+8.6%), however, the labor force participation rate eased to a 28-year low (+64%) as people dropped out in droves, either because they are retiring or simply too discouraged to continue looking for employment. It was driven by a drop of-315k in the labor force and a big-594k drop in the number of unemployed despite just +120k more people getting work.

Below are some other highlights of the week:


Americas

  • USD: The long-term foreign and local currency issuer default ratings of AAA were affirmed by Fitch. However, the outlook on the long-term rating was revised to negative from stable.
  • CAD: Current account improved to CAD-12.13b in Q3 after CAD-16.14b in Q2.
  • USD: Consumer confidence climbed this month (56 vs. 40.9) by the most in more than eight-years as Americans grew more upbeat about employment and income prospects.
  • USD: US home prices eased in September from a month earlier, the first decline after five straight monthly increases according to S&P’s Case-Shiller.
  • Most of the world’s major central banks (Fed, ECB, BoE, BoJ, BoC and SNB) agreed that they would take “coordinated actions to enhance their capacity to provide liquidity support to the global financial system.” Specifically the Banks have cut the price on existing temporary US dollar swap arrangements to USD OIS plus 50bp which is a cut of about 50bp from what is currently charged. It will apply this from December 5 to February 1 2013.
  • CBanks: Agreed to set up bilateral liquidity swap arrangements to cover any of their own currencies should that be needed.
  • US fundamentals are again doing their bit. The ADP employment report suggested that jobs rose +206k last month, a hefty +76k above consensus. Pending home sales surged +10.4% in October and the Chicago PMI rose to 62.6 from 58.4.
  • CAD: Q3 GDP annualized +3.5% vs. market expectations of +3%. Q2 revised to -0.5% from -0.4%. September GDP +0.2% from August.
  • USD: New jobless claims rise to +402k, largest level in more than a month. This suggests that labor markets are healing but very slowly.
  • USD: ISM November manufacturing PMI rises to 52.7 vs. Octobers 50.8. However, the employment index fell to 51.8 vs. Octobers 53.5.
  • CAD: November full-time jobs +34.6k, part-time -53.3k giving us a monthly loss of -18.7k. The participation rate at +66.6% eased a tad from +66.7% while the unemployment edged higher to +7.4% vs. +7.3%.
  • USD: NFP headline print was up +120k, private up +140k. The prior month revisions were significantly positive with September +52k to +210k and October +20k to +100k. The unemployment rate eased a whopping-4 ticks to +8.6% (the lowest level in two-years). Does this take QE3 off the table? However, the labor force participation rate eased from +64.2% to +64%-lowest level in 28-years. It seems that people dropped out of the workforce in droves, either because they are retiring or simply too discouraged to continue looking for employment. Monthly paychecks also slipped as average hourly wages fell-0.1% (second negative in three-months).

December 1, 2011

Forex Market Outlook 12/1/11

Filed under: Forex News — Tags: , , , , , , , , , , — admin @ 6:51 am

Well yesterday’s news did not disappoint, with the markets remaining near highs into the close.  Today will most likely be an “inside day”, providing neither new highs nor lows.  This is to be expected with a move as big as the one we saw yesterday.

But what does this all mean?  Truthfully, not much.  Essentially yesterday’s coordinated action makes inter-bank lending cheaper.  That’s it.  It doesn’t solve the problems of the Euro zone, nor does it change the political dynamic in the US.  These are the things holding us back and markets could do a lot better if there was more political courage in the world.

But there isn’t.  Germany still refuses to acknowledge the tremendous benefit they’ve received through their Euro zone participation and are steadfast in their opposition to helping anyone that doesn’t behave exactly as they do.  There are big changes that need to made in Europe obviously, but the entire world economy is basically being held hostage by the European political process.

The economic data continues to come in as a mixed bag.  Yesterday’s perfect storm showed that there are times when economies look like they are performing well; today, not so much. 

For starters, in Australia retail sales figures came in lower than expected showing a gain of .2% vs. an expected .4%.  Building approvals were also lower.  China’s PMI manufacturing figures came in at a 2-year low, which may be part of the reason why they reduced reserve requirements yesterday.

In the Euro zone PMI manufacturing figures came in as expected but in the UK they were better than expected, which is why the Pound is tracking higher this morning.

Here in the US, initial jobless claims came in worse than expected, but the expectation was for improvement from the pretty standard 400K that has been the average for some time.  Later this morning we will get ISM manufacturing figures which could reverse the mild selling we are seeing this morning.

But for now, the bigger story is the money pump into the financial system that only will serve to buy time for those that are troubled.  Until solutions are found, it will be more of the same.  There is still great risk in the market and it will take a tremendous effort and leap of faith for the Euro zone to solve their debt crisis.

The beginning of the “Santa Claus Rally” that we are seeing now is a welcome event, but don’t get lulled into believing that things are just peachy.  Yesterday’s action occurred because someone, somewhere was in trouble and the threat of global market instability was too great for Central bankers to bear.  And it also goes to show the power that these bankers can wield when things aren’t going exactly as planned. 

For example, nearly everyone is shocked that the Euro is trading at current levels despite the huge mess they are experiencing.  Yet when you compare it to the US dollar and the easy money policies we have, it pales in comparison.

Yesterday was also a reminder that inflation is on the horizon.  The only thing keeping us back from hyper-inflation is the fact that the US housing market continues to flounder.  Case in point:  I was speaking with a friend last night who confided that she was terrified of buying a home despite the fact that she and her husband have good jobs and are financially responsible people.

The uncertainty that hangs over the markets and the lack of confidence surrounding the current environment will continue to hold us back regardless of what the actual data tells us.  Therefore I will continue to trade this market in the short-term, taking advantage of moves like the one that occurred yesterday.

November 26, 2011

Trading Week Outlook: Nov. 28 – Dec. 2

Filed under: Forex News — Tags: , , , , , , , , , — admin @ 9:29 am

Nov. 25, 2011 (Allthingsforex.com) – The week ahead will mark the beginning of the final month of the year with a series of important U.S. economic data culminating with the Non-Farm Payrolls and Employment Situation report, as traders continue to ponder the impact of the EU debt crisis, the state of the U.S. economy and the odds of a QE3 announcement at the Fed’s December 13 meeting.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring the number of newly constructed homes with a committed sale during the previous month, Mon., Nov. 28, 10:00 am, ET.

In light of the better-than-expected existing home sales report, sales of new homes in the U.S. could follow suit with a small increase to 315K in October from 313K in September.

2.    USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., Nov. 29, 10:00 am, ET.

The confidence of U.S. consumers is forecast to recover from the disappointing drop to 39.8 in September as the index rises to 43.0 in October.

3.    EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Nov. 30, 5:00 am, ET.

Inflationary pressures in the Euro-zone are expected to remain unchanged at 3.0% y/y in November, same as the 3.0% y/y reading in October, but the European Central Bank might just look the other way as rising borrowing costs and fears of a double dip have placed concerns about the stubbornly high inflation on the back burner for the time being.

4.    USD- U.S. ADP-Automatic Data Processing Employment Report, a measure of jobs lost or added to the private sector of the economy, also serving as a leading indicator of the monthly non-farm payrolls, Wed., Nov. 30, 8:15 am, ET.

After adding 110K new jobs in October, the U.S. private sector payrolls are forecast to continue the trend with another 130K jobs in November. An upbeat ADP report could offer a nice prelude to Friday’s non-farm payrolls.

5.    CAD- Canada GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Nov. 30, 8:30 am, ET.

The Canadian economy is forecast to return to growth by up to 0.4% q/q in the third quarter of 2011 after shrinking unexpectedly by 0.1% q/q in the second quarter. The data should be in line with recent forecasts expecting that the Canadian economy may slow down but would be able to avoid a recession, as growth picks up from 2.1% y/y in 2011 to 2.4% in 2012 and above 3.0% y/y in 2013.

6.    USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring the amount of homes under contract to be sold, Wed., Nov. 30, 10:00 am, ET.

An optimistic sequence of housing market data could continue with the U.S. pending home sales index which is forecast to rise by 1.4% m/m in November after the disappointing drop by 4.6% m/m in October.

7.    CHF- Swiss GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Dec. 1, 1:45 am, ET.

Growing at 0.3% q/q pace in the first quarter, the Swiss economic growth in the second quarter was revised lower at 0.4% q/q from the preliminary estimate of 0.6% q/q, and it is expected to slow again to 0.2% q/q in Q3 2011. The lower GDP reading should serve as an indicator of the negative impact of the strong franc on the Swiss economy, which coupled with the rising threat of deflation could prompt the Swiss National Bank into additional action to weaken its currency.

8.    USD- U.S. ISM Manufacturing Index, a leading indicator of industrial activity, where a reading above or below 50 is the dividing line between economic expansion and contraction, Thurs., Dec. 1, 10:00 am, ET.

While purchasing managers indexes in other major economies have been declining into contraction territory, the U.S. manufacturing and services indexes have managed to sustain above the 50 boom/bust line. The U.S. manufacturing sector is forecast to show resilience for another month with an ISM manufacturing index reading of 51.5 in November from 50.8 in October.

9.    CAD- Canada Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions, Fri., Dec. 2, 7:00 am, ET.

Following the dismal October report when the Canadian labor market lost 54,000 jobs, the economy is expected to add up to 17,000 new jobs in November. The unemployment rate is forecast to stay at the same 7.3% level in November.

10.    USD- U.S. Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created or lost in the world’s largest economy, Fri., Dec. 2, 8:30 am, ET.

The upbeat economic data throughout October was followed by some reports with negative undertones throughout November, raising QE3 odds. With more FOMC policy makers warming up to the idea of additional asset purchases ahead of the Fed’s meeting on December 13, the Non-Farm Payrolls report will be a crucial part of the QE3 puzzle. The consensus forecasts are pointing to another cautiously optimistic for the U.S. labor market report with the economy adding up to 117,000 jobs in November, compared with 80,000 in October, while the unemployment rate remains unchanged at 9.0%. 

November 25, 2011

Forex Market Outlook 11/25/11

Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 6:56 am

I hope everyone here in the US had a great Thanksgiving yesterday, though the same can’t be said for the markets.  We are still in risk aversion mode as the Euro debt crisis continues to plague the global economy so the US dollar has been the favored investment vehicle of choice.

Today is a shortened session here in the US with the stock market open for a half-day session.  There is likely to be little action for stocks so the correlative effects of market movements will be minimal.  However, it must be noted that with decreased volume there is sometimes increased volatility.

While there is no news due out for the US session, a quick recap of this morning’s news shows that confidence figures in the Euro zone came in worse than expected.  While this is not surprising, yesterday’s reports of German GDP and confidence figures were positive.  GDP in Germany was 2.5% YoY, as expected.  IFO confidence figures all cam e in better than expected which shows that Germany is still moving along, despite the bond auction disaster from earlier this week,

In the UK, GDP figures also came in as expected, showing .5% growth which is not a great figure.  It is for this reason that the BOE has been ultra-accommodative despite the high inflation they are experiencing. 

Also in the Euro zone, Portugal had their credit rating reduced to junk status, and they have been all but an afterthought as the markets have focused on the Spanish banks and Italy’s government debt.

The picture continues to worsen in the Euro zone and the push for a Euro bond is picking up traction, for those who still want to see the Euro succeed.  As this situation drags out, the global economy will continue to suffer and a solution will not be forthcoming overnight.

But we are seeing a bit of a morning bounce here as perhaps some of the selling was overblown.  Risk still remains at heightened levels so I’m going to continue with the short-term trading themes until more clarity emerges.

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