The end of the first week of the new year brings with it the NFP Friday afternoon circus. Having seen a much stronger ADP print yesterday (many believe it to be a good indicator of NFP) most in the market are now looking for a very good print this afternoon. I personally don’t fall into this category, and more importantly would suggest that surely there needs to be some sort of seasonal adjustment for the December period needing to be taken into account. Either way, the herd mentality remains as do all of a sudden calls for new correlations, that is, now some pundits are calling for strong US news to be leading the way for a strong USD. Really, really, you mean economic fundamental correlations may actually become the norm? Please oh please don’t tell me that that whole risk on/off nonsense is suddenly being discarded by those “experts”. Clearly a couple of prints of decent data (not great, just decent) don’t make for a distinct pattern, but it does give you an indication of how fickle this market is and how quickly punters look for something to hang their hat on, looking for ways to react to whatever prints come up in the future. If it was only so easy, whatever happened to traders actually needing to think for a minute, dissect and digest data before making decisions? Never mind.
On the European front, yesterday’s lack of demand for French paper set the path for the EURUSD collapse and washout of 2011 lows and stops below. Most worrying for me in this is not the rate at which the French will now need to borrow or by how much that rate will increase in the near term, but the fact that punters are less inclined to hold French paper than they are, say, Italian paper. Then again, the ECB hasn’t yet seen the need to step into play to prop up the Frogs, so perhaps that explains a few things.
In the US a wild late afternoon rumour about mortgage buybacks by the Obama administration gave the market a prop and shot in the arm, until of course after market close the rumour was dispelled for what it really was, utter nonsense.
Again today I’m loathed to give levels as the market (as per yesterday’s comment) is still jostling for position and trying to get a sense of where we could go. An official announcement of yet another summit/meeting scheduled for January 16 to discuss/ratify/agree the July 2011 EFSF/IMF/ECB (and any other acronyms I may have missed) theme will keep the market on its toes and also bring to the fore the fact that 8 months later and they still haven’t done anything… Well besides print cash subversively….
It’s been an interesting start to the year and we haven’t actually seen it yet in earnest. Next week punters return to the market in a more serious capacity and once the initial wobbles over are done with, the week beginning January 19 should see us return to some sort of norm.
As always on a Friday, don’t ruin your weekend with a cheap punt.
Ken Veksler
SAXO BANK