EUR/USD Fundamental Analysis February 3, 2012, Forecast

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Economic Events: (GMT)

09:30     GBP       Services PMI                                                                     53.5                         54.0

The Services Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the services sector. A reading above 50 indicates expansion in the sector; a reading below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.                          

 10:00    EUR        Retail Sales (MoM)                                                        0.4%                      -0.8%

Retail Sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. 

A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR.

00:15     USD       FOMC Member Fisher Speaks

Federal Reserve Bank of Dallas President and Federal Open Market Committee (FOMC) voting member (2008 and 2011) Richard Fisher is to speak. FOMC members are responsible for setting the benchmark interest rate and their speeches are closely watched for indications on the future possible direction of monetary policy.

His comments may determine a short-term positive or negative trend                                                         

 13:30    USD      Average Hourly Earnings (MoM)                                0.2%                      0.2%                     

 13:30    USD      Nonfarm Payrolls                                                         150K                      200K                     

 13:30    USD       Unemployment Rate                                                   8.5%                      8.5%                     

13:30     USD       Private Nonfarm Payrolls                                          170K                      212K

 Employment Reports

Average Hourly Earnings measures the change in the price businesses pay for labor, not including the agricultural sector.

Nonfarm Payrolls measures the change in the number of people employed during the previous month, excluding the farming industry. Job creation is the foremost indicator of consumer spending, which accounts for the majority of economic activity.

The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. 

Private Nonfarm Payrolls measures the change in the number of total number of paid U.S. workers of any business, excluding general government employees, private household employees, employees of nonprofit organizations that provide assistance to individuals and farm employees.

15:00    USD       ISM Non-Manufacturing Index                                 53.2                        52.6

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) (also known as the ISM Services PMI ) rates the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. The data is compiled from a survey of approximately 400 purchasing managers in the non-manufacturing sector. On the index, a level above 50 indicates expansion; below indicates contraction.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Analysis and Recommendations:

The EUR/USD at 1.3166 winding down its day almost at the close.

European officials dashed hopes of a fast settlement  between Greece and its private bondholders due to the opposition of some of the Greek political leaders towards additional spending cuts demanded by the lenders as well as a disagreement between the IMF and Germany on the involvement of the ECB in the bond swap.

Spain’s Treasury auctioned EUR4.5 billion of medium term debt earlier, at much lower yields than previously.Investors purchased EUR2.52 billion of three-year bonds at a yield of 2.8%, down from 3.38% in January and EUR1.05 billion of five-year bonds at a yield of 3.5%, compared to 5.5% last month.

France auctioned EUR8 billion of government debt in an auction which met with solid investor demand and lower yields.

The Challenger Jobs report figures showed job losses in January totaled 53,486 in January, the highest total since last September and nearly 39% higher than job cuts of 38,519 in January 2011. Compared with December 2011 job cuts of 41,785, the January losses are 28% higher.

Government job losses totaled just 3,021, but the monthly average for 2011 was 15,255 job cuts. In the past 24 months, 325,319 jobs have been lost in the public sector

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending January 28 fell by 12,000 to a seasonally adjusted 367,000, beating expectations for a decline to 373,000. The previous week’s figure was revised up to 379,000 from 377,000.

Jobless claims have remained below 400,000, a level historically associated with an improving labor market, in 12 of the past 14 weeks.

Europe’s financial crisis still threatens the U.S. recovery, and the Federal Reserve will do everything it can to prevent it from damaging the economy, Federal Reserve Chairman Ben Bernanke said on Thursday. “Risks remain that developments in Europe or elsewhere may unfold unfavorably and could worsen economic prospects here at home,” Bernanke told lawmakers in prepared remarks.

“We are in frequent contact with European authorities, and we will continue to monitor the situation closely and take every available step to protect the U.S. financial system and the economy.”

Bernanke maintained a cautious tone on the U.S. outlook following a decision at a Fed policy meeting last week to announce that interest rates are likely to remain near zero until at least through late 2014.

At a news conference after that meeting, Bernanke indicated the central bank was considering additional monetary easing, but he offered no fresh hints of such plans in his testimony.

Economic Data Today ( key  better than expected worse than expected at forecast )      

NZD       ANZ Commodity Price Index (MoM)             1.2%                                                     -0.8%                    

AUD       Building Approvals (MoM)                              -1.0%                    2.1%                      10.1%                   

AUD       Trade Balance   1.71B                                    1.20B                    1.34B                    

CHF        Trade Balance   2.07B                                   2.85B                     2.95B                    

GBP       Construction PMI                                             51.4                         52.9                        53.2                       

 EUR       PPI (MoM)                                                         -0.2%                     -0.1%                     0.2%                     

 USD      Challenger Job Cuts (YoY)                           38.9%                                                   30.6%                   

 USD      Nonfarm Productivity (QoQ)                          0.7%                      1.0%                      1.9%                     

USD       Initial Jobless Claims    367K                       373K                      379K                     

USD       Unit Labor Costs (QoQ)                                  1.2%                     0.9%                      -2.1%                    

 USD      Continuing Jobless Claims                           3437K                   3565K                    3567K   

 

Scheduled Sovereign Bond Sales

Feb 06  10:10  Norway  Bond auction

Feb 07  09:00  Netherlands Eur 5.0bn Jul 2022 DSL

Feb 07  10:10  Greece  6M T-bill auction

Feb 07  10.30  UK  Auctions 1.75% 2017 conventional Gilt

Feb 07  15:30  UK  Details gilt auction on Feb 16

Feb 07  18:00  US  Auctions 3Y Notes

Feb 08  10:10  Sweden  Nominal bond auction

Feb 08  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Feb 08  10:30  Swiss  Bond auction

Feb 08  16:30  Italy   Details BOT auction on Feb 13

Feb 08  18:00  US  Auctions 10Y Notes

Feb 09  10:10  Sweden  Sek 0.75bn I/L bond auction

Feb 09  15:30  Sweden  Details I/L bond auction on Mar 23

Feb 09  16:00  US  Announces auctions of 30Y TIPS on Feb 16

Feb 09  16:30  Italy   Details BTP/CCTeu auction on Feb 14

Feb 09  18:00  Italy   Auctions 30Y Bonds

Feb 10  11:00  Belgium  OLO auction

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