EUR USD (1.4480) Market participants’ perceptions appear to have changed significantly since this week’s ADP and ISM index data eleases, as roughly four weeks of economic optimism devolved into pessimism in a matter of days. Talk of a double-dip recession is flying around trading circles, prompting yet more hope of an eventual QE3. Today’s US NFP number is already expected to be disappointing, given ADP’s worse-than-expected 38,000 jobs added to the private sector in May, and still another rise in US jobless claims yesterday. Traders report ‘whisper numbers’ for the employment report are 100,000-110,000 jobs added, a far cry from the 170,000-200,000 that were expected coming into this week. One thing is for sure, there will be very little chance of a negative surprise today. Reuters reported yesterday that that the EU’s Economic and Financial Committee and senior eurozone officials had in principle agreed to a hree-year adjustment programme for Greece. Any such agreement was later denied by a spokesman for the EFC, but market participants nevertheless attributed the good news to the euro as it rose to the $1.45 level. Meanwhile, Moody’s warned that the US debt ceiling mpasse has increased the very small but rising risk of a short-lived debt default. The rating agency expects to place the US under review or a credit downgrade unless a credible agreement is reached. The euro has the potential to reach 1.4540 or even 1.4775 as long as the stability threshold at 1.4235 holds.
Market Bias Index
The overvaluation bias in the Swiss franc bounced back towards its recent strength today, while most of the other major currencies demonstrate a slight overvaluation bias against the US dollar.
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Deutsche Bank
Fixed Income Research – Global