Dean Popplewell | May 06, 2013 06:51AM ET
Historically, the first Monday after the non-farm-payroll usually ends up being the quietest trading day of the month – and this Monday morning is threatening to continue that tradition. With the various bank holidays and festivals being celebrated globally, it feels like a stretch to get overexcited on this first day of a new-week even amongst the smattering of euro data already reported.
The 17-member single currency continues to make some headway outright after French and German services sector data beat expectations. However, periphery spreads have tried to derail some of this momentum. Spanish yields have edged higher, with Italy in sympathy, after domestic data showed activity in the country’s services shrank last month (44.4 vs. 45.3, m/m), the lowest pace since last December.
The eurozone’s retail sales print for March eased again (-0.1%, second consecutive decline), providing more proof that weakness in the region's consumer demand will continue to hinder the 17-member currency block. In year-over-year terms, retail sales have fallen -2.4%, much steeper than the -1.7% drop reported in March. The usual litany of woes, ranging from poor consumer spending to lack of business investment, coupled with a crippling austerity program, continues to deprive the region of a “traditional source of growth.” It's no wonder that the eurozone’s Sentix Index has come in slightly worse than expected this morning at -15.6 compared to -15.2. This report suggests that confidence in Germany has topped and could head south over the coming months. Europe’s backbone is beginning to strain.
With limited news, the highlight for the US calendar week is likely Thursday’s jobless claims report. After last week’s unexpected decline in initial claims and the somewhat better than expected April payroll report with its revisions, traders will be watching to see if the improved trend continues.
Also stateside, consumer credit gets to report and a key issue is whether the US consumer is spending enough. Up until now, the recent trend of credit outstanding has been weak, certainly not what Bernanke and company want to hear.
The yen bears will take anything – at this point they do not really care. The market bias is looking at a ¥100 test- however, short term dips cannot be ruled out. After a month of struggling to break the psychological ¥100 barrier, the bears must now feel more confident after Friday’s NFP print that another positive US data print over the next two weeks could finally prove to be the catalyst that allows the market to punch through this imaginary barrier. This USD/JPY quest may be made easier this time around if there are not as many option barrier plays built up just under the ¥100.
Golden week has provided for a tight range – however, this market remains patient and expects the ¥100 breach to gather momentum when broken.
Both the Tokyo and UK holiday have limited market interest and kept participation at a minimum. In the big picture, the EUR remains range bound – providing the that yen interest will wane, the EUR will lose its closest ally rather quickly. This market continues to remain a better seller on upticks for now.
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