On Monday, investors on global markets didn’t really know which card to play. This uncertain trading pattern was also visible in the EUR/USD cross rate. After last week’s steep losses there was no additional news to push the pair sustained below the 1.3000 mark. On the other hand, we are also not impressed by yesterday’s rebound.
Yesterday’s rebound of the euro was not supported by hard news. The global picture on Spain and on the EMU debt crisis hasn’t changed. So, we don’t see a strong case for more follow through gains of the EUR/USD.
Eco data from the US continues to give confusing signals as to the strength of the recovery. A perfect example unfolded during Monday’s session.
In March, US retail sales remained surprisingly strong. On a monthly basis, retail sales rose by 0.8% M/M, while the consensus was looking for an increase by only 0.3% M/M. The previous figure was marginally downwardly revised from 1.1% M/M to 1.0% M/M. The details show that strength was broadly based and led by building materials (3.0% M/M), gasoline station sales (1.1% M/M), furniture (1.1% M/M), electronics (1.0% M/M), motor vehicles and parts (0.9% M/M) and clothing (0.9% M/M). Core retail sales, excluding autos and gas, surprised on the upside too, rising by 0.7% M/M, while an increase by 0.5% M/M was expected.
The breakdown shows that retail sales were boosted by the warm weather as March 2012 was the warmest March on record, boosting for example sales of building materials, clothing and furniture. Also the control group remained strong, rising by 0.4%, boosting GDP expectations for the first quarter.
The NY Empire State manufacturing index weakened significantly in April. The Empire state index dropped from 20.21 to 6.56, the lowest level since November last year, while only a marginal weakening was expected (to 18.00). The details are more mixed. Shipments (6.41 from 18.21), unfilled orders (-7.23 from -1.23) and average workweek (6.02 from 18.52) dropped sharply, while delivery time (4.82 from 7.41) and new orders (6.48 from 6.84) fell only slightly. Inventories (1.20 from 0.00) rose slightly and number of employees rose significantly (19.28 from 13.58). Prices paid eased somewhat (45.78 from 50.62), while prices received (19.28 from 13.58) picked slightly up. The forward looking index weakened too, from 47.5 to 43.12.
In March, there was already some weakening seen in the details, which is now confirmed by the headline figure. The outcome suggests that the strong momentum from the previous months is easing somewhat, although the breakdown remains mixed.
US homebuilder sentiment weakened in April for the first time in seven months, while the consensus was looking for stabilization.
The NAHB housing market index dropped from 28 to 25 in April as sentiment about both the present situation and future waned this month. After hovering at very low level for several years, the index started an impressive rebound at the end of last year. The fall-back suggests that conditions remain challenging; with credit conditions still tight and continuing problems with foreclosures.
Go figure, can anyone predict what the markets are going to do from day to day. Watch out for eco data and news today from the EU.
