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Euro To Dollar – Daily Fundamental News For The EUR/USD

Yesterday’s fundamental news on the economic calendar was ofcourse dominated by the GDP data in the US, and the FOMC statement and Fed Funds rate decision in the evening session, and as forecast the US interest rates remained on hold at 0.25%. What was more interesting were the GDP numbers which confirmed the worst six month economic performance in the U.S in the last fifty years, and with the likelihood that next quarters figures will create the longest recession in history, investors appetite for risk returned with a strong move in the equity markets! This slightly perverse reaction is increasingly being seen both in equity and currency markets, where any bad news story is turned into good news, and in the case of the GDP numbers yesterday, the “good news” element was the reduction in public spending buried within the headline figure. This reaction is something we are likely to see more and more, as the markets constantly look for good news stories amid the torrent of bad news, making trading in any market extremely difficult – this is not to say that trading currency ( or any other asset class) is easy – it isn’t, but where normal economic conditions apply, yesterday’s numbers would have caused panic and alarm. When allied to the current flu epidemic sweeping the world, it is increasingly difficult to forecast what effect any fundamental news is likely to have on the currency markets at present, as we no have some many contrasting and, in some cases, perverse factors to consider. So on that cheery note, what do we have on the economic calendar for today!

Starting in Europe we have four main items of news, of which only two have any significance and these are the German Unemployment figures which were slightly better than expected at 58,000 against a forecast of 65,000, followed by the CPI Flash figures which were marginally worse than expected at 0.6% against a forecast of 0.7%. Sandwiched between these two items of news was an unscheduled speech by Bundesbank President Axel Weber. As a voting member of the ECB the currency market takes note, and even more so when it is unscheduled, which always tends to make the markets nervous. At the same time, two other items of news were released, namely the Italian CPI data which came in better than expected and the Eurozone unemployment number which came in worse than expected at 8.9% vs a forecast of 8.7%, and the combined effect of these was to stall the rally in the euro dollar from this morning’s early gains.

This afternoon attention switches to the US once again where we have the weekly unemployment claims once again, which are expected to remain flat at around 640,000 – the number of new people registering for unemployment benefit on the week, which again is a dreadful number, but one the markets are increasingly expecting. This is then followed by no less than five other pieces of news starting with Core PCE Price Index, Employment Cost Index, Personal Spending, Personal Income and finally Chicago PMI!

The first of these ( Core PCE) differs from Core CPI in that it only measures goods and services targeted at and consumed by individuals, with prices weighted according to total expenditure per item, which provides a detailed insight into shoppers spending habits, and it is generally considered to be the FED’s favourite indicator for measuring inflation ( or deflation!) The forecast for today is for this figure to remain flat at 0.2%, but if the actual is better than forecast then this could be good for the US dollar. Released at the same time we have the Employment Cost Index which measures the change in labour costs paid by businesses and the government, and the forecast for today is for 0.5%. Finally in this batch of news we have personal spending and personal income, the first of which measures the change in the total value of inflation-adjusted expenditures by consumers, whilst the second measures the change in the total value of income collected from all sources by consumers. In both cases the analysts are forecasting these figures to remain flat at -0.2%

Finally we have the release of the Chicago PMI data, which is a composite index based on a survey of purchsingh managers in the Chicago area, which asks respondents to rate the current business condition in a variety of areas. What is unusual about this figure is that it is released 3 minutes early to Kingsbury subscribers before being released to the public, and any market reaction to the data is generally as a result of trades by this group who have advance knowledge of the index. It is an important indicator and generally considered to lead the economy, with any figure above 50 suggesting optimism, and below pessimism. The forecast for today is for 35, a slight improvement on last time at 31.All in all a very busy afternoon, but remember that whatever the news, the currency markets may react in a completely unexpected way – this is just the nature of the climate that we are currently trading in I’m afraid. In the meantime you can keep up with all the latest fundamental news, latest currency news and live currency charts by simply following the appropriate links.  I have also included details on an excellent ECN broker.