This morning’s fundamental news on the economic calendar for the euro to dollar pair kicked off early with the German retail sales figures coming in worse than expected at -0.2% against a forecast of 0.2% (clearly the Germans do not have the same approach as the Italians whose philosophy is to shop their way out of trouble!!)  This was followed by the final manufacturing PMI data for Europe which came in marginally below forecast at 33.9 which is generally a leading indicator and is based on a survey of purchasing managers who provide feedback on the business conditions in the market.   The last piece of economic news for Europe this morning is the unemployment rate and forecast to be at 8.3% but these figures tend to have a muted effect on the market.

Of far greater significance are the numbers due for release in the US this afternoon, starting with the ADP non farm employment, a relatively new indicator but one which has become an accurate guide of the numbers for the non farm payroll employment figures released on the first Friday of each month.    The forecast is for -660k against a previous of -697k showing a slight improvement, although still awful numbers in the broader context.  If the numbers come in better than expected then this could provide a boost to the US dollar.  Two hours later we have 2 other red flag indicators: the ISM data and pending home sales.  As an important leading indicator the ISM is based on a survey of around 400 purchasing managers who provide responses to questions about business conditions.  Any figure above 50 indicates industry expansion and below 50 an economy in contraction and today’s figures are forecast to be at 35.8 which is flat on last month’s.  At the same time we have pending home sales which again are considered a leading indicator and represent the number of homes under contract and about to be sold, excluding new build.  This data is released around 2 weeks after the existing home sales but provides a forward view of market conditions as contracts are generally signed several weeks before the home is considered to be sold.  The forecast is for 0.2% against a previous of -7.7% showing an improvement in the housing market which could convert into dollar strength this afternoon.   However, with the G20 now in full swing and an ECB rate decision tomorrow market may take a wait and see approach until the conclusion of the conference in London tomorrow evening.

Finally we have crude oil inventories which although released in the US tend to have more impact on the Canadian dollar due to Canada’s position as a leading energy provider.  The forecast is for 3.1m against a previous of 3.3m which indicates a further increase in the barrels of crude oil held in inventory.