Stocks remain stuck in a listless fit of trading for the second straight session. That has the S&P 500 headed for another relatively flat finish.
Eased lower again as US yields continue to firm against the backdrop of Bernanke remarks, the pare now back at $1.3620 and toward the session lows nearby. Bids remain at $1.3600 area but stops are said clustered below there. Further out, area of $1.3570 low of the week becomes visible, bids and stops to surround, but better bids at $1.3550 mentioned.
"US econ has strengthened recently but unemployment to remain high and inflation low. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established. We will review the asset purchase program regularly in light of incoming information and will adjust it as needed" ... we have the necessary tools to smoothly and effectively exit from the asset purchase program at the appropriate time. In particular, our ability to pay interest on reserve balances held at the Fed will allow us to put upward pressure on short-term market interest rates and thus to tighten monetary policy when required, even if bank reserves remain high. Moreover, we have developed additional tools that will allow us to drain or immobilize bank reserves as required to facilitate the smooth withdrawal of policy accommodation when conditions warrant. If needed, we could also tighten policy by redeeming or selling securities."
Stocks continue to chop along in negative territory, despite a dose of upbeat data. Meanwhile, the dollar has pushed to a 0.8% gain, which makes for a session high against a basket of major foreign currencies.
Labor analyst says drop 'is the backside' of the unexpected surge in claims last wk from 4 southeast states - they are among largest decreases this wk. Seasonal factors expected a 4.2% drop in NSA, or about 20k. Actual NSA claims -5.5%, or -26,633, to 459,683. Puerto Rico estimated. 4-wk moving avg +1k to 430,500. Cont. claims +84k to 3.925m in Jan. 22 wk.
08:45 Italy PMI services (January) 49.9 50.8 50.2
08:50 France PMI services (January) 57.8 57.1 54.9
08:55 Germany PMI services (January) seasonally adjusted 60.3 60.0 59.2
09:00 EU(17) PMI services (January) 55.9 55.2 54.2
09:30 UK CIPS services index (January) 54.5 51.0 49.7
10:00 EU(16) Retail sales (December) adjusted -0.6% 0.5% -0.3 (-0.8)%
10:00 EU(16) Retail sales (December) adjusted Y/Y -0.9% 0.2% 0.8 (0.1)%
12:45 EU(17) ECB meeting announcement 1.00% 1.00%
The dollar gained against most of its major peers before U.S. reports today and tomorrow that are forecast to show services industries grew for a 14th month and hiring increased in January.
The euro fell for the second day against the dollar as investors bet European Central Bank President Jean-Claude Trichet won’t toughen the bank’s anti-inflation stance.
European inflation accelerated last month to the fastest since October 2008, according to a preliminary estimate by the statistics office on Jan. 31. Trichet said on Jan. 26 the ECB will “do what is necessary” to maintain price stability.
“Some of the data that’s been coming out of the U.S. suggests that the economy there is improving quite nicely and the market is starting to factor in the possibility that the payrolls data will be on the stronger side,” said Michael Derks, chief strategist at FxPro Financial.
The Australian dollar gained against all its major counterparts as reports on trade and building permits added to signs of resilience in the economy.
“We had good trade data, there are some concerns over the cyclone but the market looked at this one data print and saw it in a fairly positive light, that’s the main driver,” said Chris Walker, a foreign-exchange strategist at UBS AG.
The number of permits granted to build or renovate houses and apartments in Australia advanced 8.7% in December from November, when they fell a revised 3.9%, the Bureau of Statistics said in Sydney today.
A separate report showed the trade surplus was A$1.98 billion ($2 billion) in December, compared with the median estimate of A$1.6 billion in a survey of economists.
EUR/USD rose to $1.3826 after strong PMI data but then retreated after retail sales dropped in EU. rate fell to $1.3750/55.
GBP/USD initially rose after a strong PMI report to session high on $1.6277. But offers around $1.6280/00 capped the rise and pound declined to $1.6200/95.
USD/JPY rose from Y81.50 to Y81.84.
US data starts at 1330GMT, with the latest Jobless Claims and Non-farm Productivity, Unit Labor Costs data.
US data continues at 1500GMT with the ISM Non-Manufacturing Index and also Factory Orders.
The ISM non-manufacturing index is expected to decline just slightly to a reading of 57.0 in January from the unrevised 57.1 December reading, while factory new orders are expected to fall by 0.4% on the already-announced 2.5% drop in durable goods orders. The weekly EIA Natural Gas Stocks data then follows, at 1530GMT.
The ECB is widely expected to leave interest rate unchanged at 1.0% when it announces its decision at 1245GMT. However, the main focus is clearly on the ECB press conference at 1330GMT.
Trichet will likely maintain heightened anti-inflation rhetoric and reiterat that rates "still remain appropriate."
Trichet is also likely to confirm that ECB bond buys are ongoing.
Daily studies on WTI are bullish after oil rose above the 5-DMA, also initial support at $90.95. Resistance seen from the Jan 31 high at $92.84, the Jan 19 high at $93.02, the Jan 3 & 12 double-top at $93.44/46 and the daily Bollinger band top at $93.89. Aug 4 resistance line seen at $94.63.
USD/JPY printed session high on Y81.76. Talk of some stops looming above Y81.85/95 as yet unconfirmed, but lack of momentum has turned pair back to current Y81.67.
EUR/USD resumes decline with stops tripped through $1.3765 after some additional selling in the $1.3775/85 zone from a Russian name. Further bids lie in wait towards $1.3725/45. rate printed session low on $1.3758 and currently trades at $1.3763/65.
GBP/USD fell sharply from the $1.6282 high with Middle Eastern sellers noted in the fall. Bids are now placed in $1.6205/00. rate holds around $1.6210.
Gold holds below the 5-DMA and Jan 3 resistance line, initial resistance at $1337.3/1337.9 respectively. Spot also holds above the 38.2% Fibonacci, initial support at $1326.40. Daily studies show bull divergence. Further resistance seen from the 21-DMA at $1353.90, 100-DMA at $1360.20 and former 23.6% Fibonacci at $1366.30. Long-term support line at $1298.70.
Inflation and Egypt vied for market attention on Thursday as investors watched uneasily the ongoing unrest in the Middle East linchpin while waiting for remarks from the heads of both the European Central Bank and the Federal Reserve.
Mr Trichet’s hawkishness should be a sharp contrast to his US counterpart. The Federal Reserve has been notably less concerned about inflationary pressures than its European counterparts.
Ben Bernanke is speaking to the National Press Club in Washington at 1800 GMT.
“We think he will have to depart significantly from the latest Fed statement to really affect the dollar but his comments on inflation will be interesting,” said Gareth Berry at UBS. “He recently said the risk of deflation has ‘receded considerably,’ while the Fed [statement] noted only that measures of underlying inflation have been trending downward.”
Investors are already closely monitoring inflation measures in recent economic data for signs that persistently high commodity prices are beginning to push costs further up the chain.
Investors would have been reluctant in any case to push for a strong market direction ahead of the ECB’s deliberations, but the rising violence in Egypt raised fears that the unrest could worsen and potentially spread elsewhere in the region.
“The economic data continue to come in stronger, and we’re seeing inflation that the market cares about, even if the Fed does not,” said Michael Pond, interest rate strategist at Barclays Capital.
Bulls took heart on Wednesday from the ADP employment survey, which showed 187,000 workers were added to payrolls last month – above expectations.
The real question was how this would translate into Friday’s data. Market expectations are for about 140,000 jobs to have been added.
“ADP has not been a particularly good payrolls predictor recently,” said Rob Carnell at ING. “The stronger data today give us only slightly more comfort in our (upwardly revised) 175,000 forecast for payrolls.”
Today's focus is on ECB rate decision, then on the latest Jobless Claims data. At 1500GMT the ISM Non-Manufacturing Index and Factory Orders are due to come.
GBP/JPY moved higher on the UK PMI data to a session high on Y132.95 before easing to Y132.65. Cross tried to resume its gain but managed to test only Y132.88. Still cross holds higher.
EUR/USD confused by the EMU retail sales data with weaker figures but a better revision for November. Bids lie below down to $1.3770 with reported stops through $1.3765 ahead of lower bids $1.3725/45. Euro currently trades around $1.3782.
Cable gains to $1.6282 after release of much stronger than expected UK Jan PMI services data. Offers mentioned ahead of $1.6300. Rate currently hods around $1.6255.
The dollar gained against most of its major peers before U.S. reports this week that may show services industries grew for a 14th month and hiring increased in January.
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