With the beginning of the month data behind traders and the end of the month data weeks away there is a vast void with US government data unavailable. What little data is expected in the middle of the month, US data is usually the focal points, with US unemployment data due each Thursday. Starting this month without the release of the nonfarm payroll report traders have become more and more stressed trying to make sense of what little data they have.
The US National Association for Home Builders will release its survey of building conditions in October. The housing market index is projected to slip to 57 from 58 in September. Higher mortgage rates are probably slowing new home sales. The Fed will release its beige book on Wednesday. With little economic data being released during the shutdown, policymakers will have to assess the economy by relying on the anecdotes contained in the book. The book is being prepared in advance of the Fed’s October 29-30 policy meeting.
New flow has been centralized on the US debt ceiling and budget negotiations, while European and Asian leaders have been rather quiet and what comments they have made individually or through the G20 summit have been mostly covering the US situation and the FOMC tapering programs, which has most likely now been pushed back until 2014. The US dollar continues to trade in the red, this morning the DX is 80.37 but touched below 80.20 on Monday. Each news release or press conference regarding US lawmakers sends the dollar on a roller-coaster. The US Dollar Index decreased by 0.09 percent in yesterday’s trading session on the back of US government Shutdown. However, expectations that the US lawmakers will find a way to raise debt ceiling, cushioned sharp fall in the dollar. The dollar eased against the yen in Asia this morning as traders focus on Washington, where lawmakers say they are close to a deal to reopen the government and avert a debt default. The greenback bought ¥98.49 in Tokyo trade against ¥98.67 in New York on Monday afternoon.
The euro bought $1.3554 and ¥133.51 compared with $1.3559 and ¥133.79. Japan’s Finance Minister Taro Aso on Tuesday voiced growing frustration with the protracted US debt-ceiling standoff, calling on politicians to get to grips with the situation. The euro benefitted from a positive print of industrial production yesterday while traders will watch Germany’s ZEW release later today. A possible US debt default would have “dramatic consequences” for the global economy, EU Economic Affairs Commissioner Olli Rehn says. “It is very important that the US overcomes its fiscal gridlock,” Mr Rehn said on Monday as he arrived for a meeting of eurozone finance ministers. His warning follows remarks in a similar vein by the governor of the French central bank, Christian Noyer, in the French newspaper Le Figaro. Noyer, a former vice president of the European Central Bank who sits on the ECB’s policy-making body, said: “If we were to have … an accident over the American debt it would be, as the IMF has said, a thunderbolt for the financial markets.” Noyer said such an event would generate “extremely violent and profound” turbulence around the world. An EU official speaking last week warned too about the possible huge impact of a US debt default, saying there was very little that could be done to prepare for such an eventuality. The UK pound gained 11 points this morning following its cousins as the US dollar declined. The pound is trading at 1.5994.
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