Today's Risk Events Could Increase USD's Woes

Overnight, improving market confidence fuelled an increase in risk appetite causing the EURUSD to surge higher by over 100 pips to 1.5090 presently (see diagram). A possible retest of the 2009 high at 1.5145 is now a possibility today.

Earlier this morning, the Euro-zone posted an increase 0f 0.1% in its Unemployment Rate registering 9.8% which is the highest reading in almost 11 years. The zone did, however, record an improvement in its Manufacturing activity by producing an index reading of 51.2 from last month’s 50.7.

The early hours also saw the UK posting a disappointing PMI manufacturing figure of 51.8 amid expectations of 54.0 although the Nationwide house price index did increased by 0.5% from the previous month.

Following the overnight trading pattern of most of the other major currencies, the GBP also rose sharply to its current value of 1.6570. Again, this action is mainly due to an increase in risk appetite as opposed to an improvement in the UK’s economic outlook.

There are serious event risks today with the release at 10.00am EST of the US ISM index( expected to drop to 55.0), Construction Spending( expected to fall by 0.5% from previous month) and Pending House Sales( expected to fall by 1.0%).

Should these figures be realised, then the USD could come under further pressure as they could cause the market to ponder about sustainability of the present global recovery. If any serious discrepancies are recorded by any of these readings, then an increase in volatility is very likely to ensue.