Euro Drifts as Financial Markets Make Adjustment to Monday’s Overreaction

Volume and volatility were relatively low on Tuesday, leading to a two-sided trade in some of the commodity and currency markets. The price action was tame compared to Monday’s excessive movement as investors began to take to the sidelines ahead of Wednesday’s speech by Fed Chair Janet Yellen and Friday’s release of the latest U.S. Non-Farm Payrolls report.

For the record, the EUR/USD was trading down .0009, or -.08% at 1.1234. The GBP/USD was at 1.5157, -.0016, -0.11%. December Comex Gold was at $1131.60, -0.10, or -0.01%. November Crude Oil was trading $45.08. Up 65 cents, or 1.46%.

 A mixed stock market helped stabilize gold and crude oil after a successful test of the August bottom. Investors appear to be comfortable with crude oil near $45.00 where it has traded the past month. A failure to hold this level on a weekly closing basis may indicate an important shift in investor sentiment to the downside.

All-in-all, traders are saying that yesterday’s volatility was probably an overreaction and today is the technical adjustment.

There was some news on Tuesday. S&P/Case-Shiller’s 20l-City Index reported  5 percent rise in July, roughly in-line with analysts’ estimates for a 5.1 percent increase.

The Conference Board’s Consumer Confidence report showed a reading of 103.00, up from 101.3, and better-than-the-estimate at 96.2

Traders were also looking ahead to Wednesday’s session because four Fed members are scheduled to deliver speeches which could influence the price action. At 8:00 a.m. ET, New York Fed’s Dudley will talk about market liquidity. Fed Chair Janet Yellen will make the welcoming remarks at a St. Louis Fed event at 3:00 p.m. At 3:10 p.m. ET, St. Louis President James Bullard speaks at a St. Louis Fed community banking event. Finally, Fed Governor Lael Brainard also speaks at the St. Louis Fed event.

The schedule sounds a little mundane, but nonetheless, investors will be listening for clues as to the liming of the next Fed rate hike.

On Wednesday, the U.S. will also release the ADP private sector employment report at 8:15 a.m. ET. This report may shed some light on what to expect in Friday’s U.S. Non-Farm Payrolls report.

Finally, German’s Preliminary CPI on a month-to-month basis was down 0.2% versus an estimate of 0.1%. Last month, the reading was 0.0%.

In the U.K., Net Lending to Individuals came in at 4.3B versus an estimate of 4.1B. Mortgage approvals were only slightly better coming in a 71K versus 70K.

CBI Realized Sales was 49, up from 24 and well-above the 29 estimate.