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U.S. jobless claims lift markets, Swiss Franc weak across the board.
Jobless claims in the United States came in at 395K, compared to the last report at 400k. This is a four month low. The problem right now is that companies are slow in hiring, rather than firing. This data was for the week of August 6. The markets have gone a drastic change since then and it remains to be seen how confident businesses are going forward. The U.S. trade deficit increased in June to -$50.2 billion. Even though import from overseas countries declined, U.S. exports declined at a much faster pace. A slowdown in exports and imports show lack of growth both in the U.S as well as overseas. However, businesses are optimistic that a weaker Dollar will increase the demand for U.S. goods from overseas clients. The Euro is up 10% and the Aussie is up 15% against the Dollar so far this year.
The economic calendar is relatively light today. The Canadian Trade Balance came in line with expectations at -0.8 billion Canadian Dollars. There was not much impact on the USD/CAD with this data release. One of the major releases that the European markets expected today was the ECB Monthly Bulletin. The Governing Council’s decision to keep the interest rates untouched, after an increase of 25 basis points in July 2011, indicates that the Bank is still waiting to see an upward pressure on overall inflation. The UK CB Leading indicator remained unchanged in June 2011 in comparison with the previous month as the weakness in the major constituents of the Index expanded.
U.S. markets opened higher on account of the better than expected jobless claims. The Dow Jones industrial average, Nasdaq and S&P 500 index are up approximately 2.0% as we write this report. The British FTSE, the German DAX and the Italian MIB indices are also up for the day. Gold prices have eased off from recent highs and trading at $1759 an ounce in early U.S. trading. We have seen a 400 pip rally in the USD/CHF and a 550 pip in the EUR/CHF today. We don’t believe this rally is sustainable and are going to sell the rally. If the USD/CHF falls below 0.7500, we see the next level of support at 0.7250. Similarly if the EUR/CHF falls below 1.0770, the next level of support is at 1.0300.
Eugene Ross, Analyst
Admiral Markets
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