Europe & US: Further Signs of Economic Trouble
Thu, Apr 3 2008, 13:37 GMT
by Andrei Pehar
Another round of economic reports were released today, none
of them really offering much encouragement for the economies of Europe, the UK, or the United States.
The trading day started with Services PMI numbers coming out of both Europe and
the UK.
The EU experienced a slight drop from 51.7 to 51.6, meanwhile the effect was
more severe in the UK, where the drop was from 54.0 to 52.1 (analysts had been
expecting a smaller drop to 53.3).
What really turned the markets is when European Retail Sales came in at -0.5%,
a sharp decline from the prior month which was revised up to 0.5%. Analysts
here were expecting a slight decline to 0.2%, but still a positive
number. This, combined with recent Dollar strength, caused additional
downward pressure on the EUR/USD, pushing it as low as 1.5510
Then the United States
announced a sharp rise in unemployment claims - 407,000 versus 369,000 the
previous month. This caused a temporary rally in the EUR/USD which took
it up to 1.5622
The day ended with at least one bit of positive news, when the ISM
Non-Manufacturing Composite Index came in at 49.6, compared with 49.3 the prior
month (analysts were actually expecting a slight decline to 48.5). The
logic is that purchasing managers are slowly increasing their spending, and
their spending habits are often dictated by internal company financials not yet
released.
The downward move of the EUR/USD resumed on this news, and we currently find ourselves
below both the daily and weekly central pivots, as well as both the 50 and 200
moving averages. This suggests that more lows may be in store for the
EUR/USD in the coming days, bringing much-needed relief to European
manufacturers and exporters.
All eyes are of course on the US Non-Farm Payroll numbers – due out tomorrow with a decline of 50,000 jobs expected. A positive surprise would likely continue the decline of the EUR/USD pair into next week, meanwhile an even worse number might kick-start another rally.
