The euro has gained over 100 points on Thursday, reversing the direction we saw a day earlier. In the European session, EUR/USD is trading in the low-1.14 range. On the release front, German Factory Orders was excellent, posting a gain of 4.2%. In the US, today’s major events are Trade Balance and Unemployment Claims.
Are Greece and its international creditors on a collision course? The new Greek government has declared that it will not honor the current bailout agreement and has put a halt to the sale of major public assets to help pay back debt. The ECB hit back late Tuesday, saying that it would no longer accept Greek government bonds as collateral for ECB loans. This will put pressure on Greek banks and serves as a warning that the ECB will idly stand by as Greece tries to avoid its bailout obligations. The drama will continue next week, as German Chancellor Angela Merkel and Greek Prime Minister Alexis Tsipras attend an EU meeting in Brussels next week.
In the US, ADP Non-Farm Employment Change was well off expectations, falling to 213 thousand. The estimate stood at 224 thousand. The markets are bracing for more bad news on Thursday, as Unemployment Claims are expected to rise to 287 thousand. If the forecasts prove correct that the labor market has started off 2015 on a weak note, we could see the US dollar lose ground.
German Factory Orders impressed in December, jumping 4.2%, crushing the estimate of 1.4%. Earlier in the week, there was good news from PMI reports, as Spanish, Italian and Eurozone Services PMIs all improved in January. All three readings were above the 50 level, indicative of expansion in the services sector. Meanwhile, Retail Sales, the primary gauge of consumer spending, weakened to 0.3% in December, down from 0.6% a month earlier. The indicator managed to beat the forecast of -0.1%.
EUR/USD 1.1436 H: 1.1396 L: 1.1316
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