Breaking News

Euro Holds Its Ground With 1.3600 In View

By Boris SchlossbergForexJan 31, 2013 06:35AM ET
Euro Holds Its Ground With 1.3600 In View
By Boris Schlossberg   |  Jan 31, 2013 06:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Market Drivers For January 31, 2013
  • German data mixed but EUR/USD remains bid
  • Aussie wobbles in Asia on S&P report on China but recovers
  • Nikkei 0.22% Europe -0.67%
  • Oil $97.70/bbl
  • Gold $1675/oz,
Europe and Asia:

AUD: HIA New Home Sales 6.2% vs. 3.0%
AUD: Private Sector Credit 0.4% vs. 0.2%
JPY: Industrial Production
JPY: Labor Cash Earnings -1.4% vs. 1.1%
JPY: Housing Starts 10.0% vs. 13.6%
EUR: German Unemployment Change -16K vs. 9K
EUR: German Retail Sales -1.7% vs. 0.1%

North America:

USD: Personal Income 8:30
USD: Personal Spending 8:30
USD: Initial Jobless Claims 8:30
CAD: GDP 8:30

Its been a quiet night of trade in the currency market as EUR/USD consolidated its gains amidst mixed economic data out of Germany. German Retail Sales printed far worse than expected plunging -1.7% versus forecasts of -0.1% decline as consumers clearly shut their purse strings tight during the slowdown in Q4. Part of the drop was attributed to calendar effects, but even on a calendar adjusted basis December turnover was considerably weaker than anticipated.

The dour news on the consumption front was offset by much better than expected German labor data. Unemployment declined by a whopping -16K versus expectations of a rise of 10K. Improving business confidence especially amongst the small to medium sized companies has been a key driver of demand as Germany continues to rebound from the Q4 slump.

The positive news on the labor front is much more important than the dip in consumption. The increase in jobs will lead to higher incomes which in turn should help boost consumption in Euro-zone's largest economy as the year proceeds. The German unemployment helped to steady the EUR/USD and the pair remains above the 1.3550 level as longs continue to target the 1.3600 figure on enthusiasm over the recovery in the region in Q1 of this year.

Meanwhile in Asia, Aussie dipped below the 1.0400 level once again after a report by the S&P suggested that China's investment boom will have to cool considerably in the foreseeable future. According to S&P economists, who've come up with a model to determine the vulnerability of economies to an investment led collapse, China ranks number one on the list.

The S&P methodology compares investment spending as a percentage of GDP to real GDP and adjusts the two measures in a way that makes it possible to rank fast- vs. slow-moving economies in terms of risk. China, with 40% of its GDP tied up in investment ranks the highest in terms of risk.

Although the S&P report indicates that such imbalances may lead to an economic collapse, at the very least it suggests that China will have to rebalance its growth towards consumption in order to avoid a possible bust. The Aussie which has been the primary beneficiary of China's infrastructure boom as the supplier of key commodities immediately sold off on the news dropping to a low of 1.0380 in late Asian trade.

Fears over the slowdown of the great "China demand" trade have dogged Aussie since the start of the year and the pair has been relatively weak as a result of those concerns. For now it appears to have stabilized near the 1.0400 level and may consolidate around the figure for the rest of the day. However, if the pair breaks the 1.0380 lows in North American session it may tumble all the way to 1.0350 as the day proceeds.

In North America today the markets will get a glimpse of the weekly jobless claims, personal spending and personal income data as well as Chicago PMI release. The latest consumer confidence data has been much worse than anticipated, affected in large part by the increase in payroll tax rates and the political wrangling in Washington. Therefore it will be interesting to see if the dour attitudes translated into a reduction in spending.

On the other hand, the weekly jobless numbers continue to impress and if today's results beat expectations once again, the news could help boost USD/JPY which has also been chopping around for most of the night near the 91.00 figure. Although even if the pair rallies it may have a very difficult time clearing the 91.50 barrier given the fact that there are more that 5 Billion of option expires reported at that level.
Euro Holds Its Ground With 1.3600 In View

Related Articles

Euro Holds Its Ground With 1.3600 In View

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Write your thoughts here
Replace the attached chart with a new chart ?
Post also to:
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email