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Fundamental Analysis of Equity

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November 7th 2008, Unemployment Data On Dock
USD
The USD had an active day, struggling for much of the day until it picked up steam in late
trading and made actual gains on both the EUR and GBP. Greenback investors behaved in a
cautious manner for much of the day on Thursday as they waited for the decisions from the
European central banks. Trading broke into a flurry testing the low end of the USD range
when the astonishing action from the BoE was delivered, but as the hours went by the
greenback began to show strength. It is not strong fundamental data from the U.S. that is
fueling this USD momentum, weekly Unemployment Claims came in with a 481K figure,
slightly above the forecast of 480K. The U.S. equity markets continued to do no favors for
investors either as both the Dow Jones and S & P roiled with poor results. Today the always
critical Non Farm Employment Change data is on schedule and a staggeringly bad number of
minus -200K is expected. Investors already under the gauntlet of bad sentiment will watch the
employment numbers carefully, including the Unemployment Rate release which has an
estimate of 6.2%.
Perhaps part of the strength the USD is showing is due to the well publicized stimulus
programs the U.S. government has presented in a timely fashion. There is now a discussion in
Washington D.C. that has grown from a whisper and into a large movement, which involves
the possibility that the government will come to the aid of its automobile manufacturers. This
is important because of the knock on affect that would ensue if a company like General
Motors were to go bust which would cause a massive domino affect of unemployment.
Commodity prices particularly Oil showed weakness across the board yesterday, highlighting
that global demand for physicals are slowing. Hard economic data will actually return to the
fore today in the currency markets, investors must be ready for the Non Farm Employment
numbers, considering that the U.S unemployment data has been poor lately, it would be a

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surprise to see anything but a negative number. A choppy day of trading should be expected
for the USD as investors will likely remain cautious until they seen the employment data.
EUR
The EUR lost ground against the major currencies yesterday as the ECB came out with an
interest rate cut of ‘only’ .50%. The European Central Bank brought their key lending rate to
3.25%, but this number was greeted by a great deal of argument considering that the BoE had
cut their interest rate in much more aggressive manner only forty five minutes beforehand.
ECB President Trichet’s press conference after the announcement reflected an air of caution,
stressing that the European economy faces a difficult path, admitting that inflation is much
less a risk presently, and ultimately expressing that another rate cut may be necessary in the
short term. The German’s released their Factory Orders data previously in the morning and it
was a stunningly bad result of minus -8.0%, far below the already negative prediction of
minus -2.2%. The German numbers combined with the perception that the ECB made a
cautious interest rate cut created an instant debate among investors. Part of the problem it
illustrates is that the European Union as an economic sphere encompasses many opinions. It
remains a difficult task to create a unified voice and because of this, questions persists
regarding the proper direction for the European Union to confront the recessionary data which
has begun to take hold. European leaders are meeting today and this weekend, and it remains
to be seen if the European Union can produce a coordinated plan with actual measures. Today
the EUR will trade under a cloud of questions that is prevailing from investors, they will also
monitor the results from U.S. employment data which will create a dollar centric reaction.
GBP
The Bank of England stunned the investment world on Thursday with an extremely
aggressive interest rate cut of 1.50% bringing their main interest to 3.00%. The action was
well received by many because it showed that the BoE has acknowledged the extent of the
problems facing the U.K. economy. Immediately after the strong shift in monetary policy
from the BoE, U.K politicians including Alistair Darling called on banks to make sure they
pass on the interest rate cuts to the public. It will be easier to ask banks to take this action, but
harder to get them to actually do it. The Halifax HPI survey was released in the morning prior
to the BoE decision and it once again provided discouragement coming in with a minus -2.2%
result compared to the forecasted minus -1.5%. Though the Bank of England has certainly
taken a staunch approach and provided its economic foundation with impetus it will remain a

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 November 7th 2008, Unemployment Data On Dock USD The USD had an active day, struggling for much of the day until it picked up steam in late trading and made actual gains on both the EUR and GBP. Greenback investors behaved in a cautious manner for much of the day on Thursday as they waited for the decisions from the European central banks. Trading broke into a flurry testing the low end of the USD range when the astonishing action from the BoE was delivered, but as the hours went by the greenback began to show strength. It is not strong fundamental data from the U.S. that is fueling this USD momentum, weekly Unemployment Claims came in with a 481K figure, slightly above the forecast of 480K. The U.S. equity markets continued to do no favors for investors either as both the Dow Jones and S & P roiled with poor results. Today the always critical Non Farm Employment Change data i ...
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