Equities are a bit softer this morning and so is the dollar. The current paradigm remains in force (equities higher è dollar higher); when or if this changes it will be something to watch for and perhaps try to understand. I’ve noticed some journals are creating narratives for the bounce in EUR/USD, but as we’ve noticed in recent days, the bear trend has matured and is due a counter-trend move, if only to give sellers some time to regain their strength. Monday being a public holiday in the U.S and Canada might also explain, at least in part, any pullbacks that occur as the week nears it’s close – quite simply short term traders may just be taking some skin out of the game for now. Not surprisingly the low, in EUR/USD was within an established support zone. I’m uncertain how large a bounce we will get from there, but the 1.3330 zone represents the most obvious and recently established of resistance zones.


Some Eurozone country data this morning: Spanish GDP has come in roughly in line; as has German unemployment; but Italian retail sales is showing an accelerating downward trend, it’s worth noting, though, that this is the non-seasonally adjusted number, the seasonally adjustment is published later in the morning. In aggregate for the Eurozone, money supply growth has increased slightly, although private loans have somewhat declined, perhaps a bit more than expected. What does this all mean? Yet again the evidence is right in front of us, tough tough times for the Eurozone economic area. Business and consumer sentiment data later on this morning is likely to reinforce this message. But if and when data disappoints later on this morning and the euro continues to strengthen, it will support the theory that we’re in the midst of a pullback in the EUR/USD bear trend (or should I just say a pullback in dollar strength? Perhaps that’s as appropriate).


This all means that sterling is likely due a recovery of some sort as well. It’s been interesting observing the UK earnings season in recent weeks. A number of high profile corporates with a global footprint have identified recent sterling strength as a serious impediment to profit growth. This may or may not be true, but the cynic in me wonders if this has been an opportune time for corporate leaders to appeal to the Bank of England about maintaining the status quo in rate policy. Perhaps they’ll be able to convince Carney to hold off on raising interest rates.


Preliminary GDP and Core PCE price numbers are the big data points to come out of the US later in the afternoon.