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Sunday, September 07, 2008

US Non-Farm

Volatility is back into markets, majors and stocks all faced some enormous losses yesterday as investors don’t really understand what is taking place in financial markets; not just the Euro or the British pound the US dollar joined the plunging game yesterday,

even when we saw it strengthen against the European currencies but it dropped against the Japanese Yen.

Outlook in economies is getting gloomier; the situation in the Zone and Royal economies is getting darker. We thought that Mr. Trichet would be changing his stance yesterday in the Interest rate statement which was released after holding rates steady at 4.25% for the second consecutive time, but he decided to hold on the Hawkish statement believing that inflation in the zone can be aggravated easily with any fluctuation in the oil prices.

A "Weak Episode" that's what Trichet called the slowing growth in the Zone and along with the hawkish statement market fears of a recession increased, as the 15 economies are teetering on the edge of an inescapable doom if the ECB don’t move in the upcoming months.

But today's highlight remain heading towards the Americans, with our calendar full of Labor fundamentals that would give us an idea of how this sector is doing as we are about to end the third quarter of this year.

Even if we consider the United States the best of the worst now but their labor markets continues to soften with expectations that lay offs would take place for the eighth consecutive month, which will continue to weighing upon the American growth and shaken the confidence of household as they see a big threat on the total Income that could be cut at any minute.

That's why the citizens that were not fired from the their jobs are now trying to hold on their current jobs just to survive the tsunami that destroyed everything it moved upon, as their incomes fell in August no Spending will be taking place even if the America's output reading signaled to some improvement in the second quarter due to the given away rebates, but expectation now are increasing that the growth in the second half of the year would stagnate.

The American session will start its usual trading today with a report released by the Labor Department which is the Non-farm payroll reading, the median estimate indicates that 75 thousand jobs were cut in August from the previous 51 thousand cuts.

Forecasts varies and this time the range between expectations is wide, according to the survey the worst forecast signals to 150 thousand job cut as the economy slows, but personally I believe that this reading it’s a bit augmented because we recently saw some improvement in the manufacturing and the services sectors even when sub-indexes figure confirm that the employment sector continued to contract. Others believe that a contraction in the labor markets will continue but to better than expectations, 40 thousand lost is the best case scenario coming better than the previous losses; this reading is most likely to be seen today…

Other accompanying data are about to released; expectations that the Unemployment rates would hold at 5.7% levels, but if high layoff would take place in August the unemployment rate would jump higher to 5.9% according to what markets expect. The Average hourly earning would be holding still at 0.3% on the month and on the year it would stand at 3.4% levels.

The bulls are waiting to see the result of today's data, as if the reading came to better than expectations the Dollar will remain to be the main conqueror in the markets, which would give it some strength to erase some of the losses that halted upon it yesterday, letting the Japanese Yen to strengthen against majors due to the lower risk appetite that took place yesterday to extend today in the Asian session.

My dear reader seriously today get out of markets, as the increasing volatility is making the situation very risky as the movements are not defined and most support levels for majors have been broken increasing the possibility that majors might have fallen in a bear market.

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Disclaimer:

The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.