It's been a quiet listless night of trade in both FX and equities with dollar slightly better bid on more elevated risk-off tones while equity futures were 50 basis points lower in early European dealing.

On the eco calendar the PMI data out of Europe and UK offered little fresh news essentially confirming the highly contractionary conditions in the region. The EZ Composite reading came in at 30.5 vs. 32 eyed while the UK Services PMI was slightly better at 27.8 vs. 25.

With little fresh newsflow investors were happy to take some profits after yesterday's runup with markets warily eyeing today's weekly jobless claims data out of the US. The continuing claims number is expected to print at 24.76M versus 22.82M the month prior which is a massive number and could weigh on the markets especially it exceeds estimates and crosses the psychologically important 25M mark which will then, in turn, create headlines in the media.

Up to now, the market has been trading on a hopium combination of endless liquidity from the Fed and the prospect of a possible vaccine against COVID, but as the brutal reality of the lockdowns takes its toll on economic data investors may shift their focus to the dour data. As countries and various US states begin to the slow process of restarting what is becoming increasingly clear is that economic recovery will be anything but a V-shaped rebound.

The huge cost of 25M unemployed in both benefits and lost productivity and output could begin to weigh on investors' minds as they reconsider the relentless ramp of the past few weeks. Indeed the unemployment data could be the single most important variable for the next few months as it will be perhaps the best gauge of the speed of the rebound. For now, the positive mood dominates equity flows but if the cold hard reality of eco data begins to chip away at expectations sentiment will sour quickly.

Author

Boris Schlossberg

BKTraders and Prop Traders Edge

Boris Schlossberg was key speaker at the FXstreet.com International Traders Conferences 2010. Mr. Boris Schlossberg is a leading foreign exchange expert with more than 20 years of financial market experience.

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