USD
USD was pressured on Tuesday, but the results turned out to be rather controversial – the dollar strengthened against the euro, but slipped versus the pound and the yen. Sentiment towards the euro had been obviously upset by the Greek and Portuguese debt fears, which made safe haven assets more attractive, despite the fact that yesterday’s messages that 25 out of 27 euro zone states agreed to a permanent 500 bn euros rescue fund and signed a fiscal pact for stricter budget discipline boosted positive sentiment towards the 17-nation single currency, but only for a short time. Turning to today, quite a batch of significant data is scheduled to be released out of the US economy. Economic calendar will cover ADP private jobs, which are likely to add +170/190 K in January after the prior +325 K in December, which indicates improvement in the labor market and gives reasons to expect the US labor report, due on Friday, to come in with positive results as well. Manufacturing PMI, released by the ISM is likely to climb from 53.9 to 54.5 in January. с 53.9. Construction spending will probably stay within the uptrend in December, posting +0.7% m/m growth after +1.2% m/m earlier.
ЕUR
The euro climbed against the dollar at the beginning of the overnight session following good news that the European leaders finally agreed to introduce a permanent rescue fund and a new fiscal policy. Later, however, the EUR gave away its gains and closed the session with losses against the dollar, driven by renewed Greek debt concerns and fears that Portugal might be the next country to need debt restructuring. As for today, only few releases are likely to come in. Preliminary PMI manufacturing index is expected to remain unchanged in January, posting 48.7 in the euro zone and 50.9 in Germany. Furthermore, the European Central Bank is due to publish loan data. As for the euro’s short-term outlook, trading activity will most likely slow down ahead of significant labor report, released out of the US this upcoming Friday.
GBP
The British pound hit its two months high versus the dollar on Tuesday, bolstered by the UK positive economic data. Consumer credits rose from -33 to -29, while forecasts predicted -31. Meanwhile M4 money supply suddenly shrank in December, by 1.4% m/m, 2.5% y/y after the previous -0.5% m/m, -2.5% y/y, which gives reasons to anticipate another policy softening from the Bank of England as soon as on the upcoming meeting in February. And although this information produced no effect on the market yesterday, it can become a significant driver for the trades anytime. Today traders will focus on the UK PMI data. Manufacturing index is expected to climb to 49.7 in January and even to enter the uptrend zone above 50.0 after 49.6, registered in December, which is a good sign on the one hand. However, Nationwide house price index is expected to continue dribbling lower, posting -0.1% m/m after the prior -0.2% m/m, which is definitely not a positive factor for the sterling on the other.
JPY
The yen had been driven by two factors on Tuesday, so the pair traded within narrow ranges with the yen slightly gaining against the dollar at the end of the session. Japanese finance minister Adzumi said the BoJ might take “decisive measures”, and the yen immediately stopped its decline, triggered earlier by the European fiscal crisis fears. Today’s economic calendar revealed improving situation in Japan’s automotive sector, where new car sales jumped by 40.7% y/y in January. December average salaries remained the same, slipping by -0.2% m/m after -0.2% y/y in November. In other words, USD/JPY pair will most likely keep on consolidating within the ranges until some significant data comes in.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
