Forex Major Currencies Outlook (February 5, 2014)

Data from the US was better than expected, with factory orders dropping by only 1.5% instead of the estimated 1.9% decline. No other reports have been released from the US yesterday while today has the ISM non-manufacturing PMI. Based on the manufacturing component of the report, another disappointment might be in the cards but analysts are still hopeful that it will improve from 53.0 to 53.6.

EUR

The euro edged slightly higher to the dollar in yesterday’s trading sessions, supported by an improvement in sentiment. Data from the euro zone was actually weaker than expected, as Spain reported a higher than expected rise in joblessness. Unemployment rose by 113.1K in euro zone’s third largest economy while medium-tier inflation reports also missed expectations. Services PMI from Spain and Italy are up for release today, along with the region-wide figures. Both economies could post improvements, which might help keep the euro afloat.

GBP

The pound took a break from its recent selloff to its major currency counterparts, as the UK construction PMI printed better than expected results. The actual figure climbed from 62.1 to 64.6, outpacing the consensus at 61.6. The services sector will release its PMI today and possibly show a rise from 58.8 to 59.1, but a weaker than expected reading might result to another pound selloff.

CHF
The Swiss franc consolidated to the dollar in recent trading, thanks to the lack of major reports from Switzerland. There are still no major reports lined up for today so the USD/CHF pair might keep reacting to risk sentiment.

JPY

The yen took advantage of the drop in the Nikkei and the selloff in the Asian session to rally against its currency counterparts. There were no reports released from Japan recently, and only the average cash earnings report was released today. It showed a 0.8% uptick, better than the estimated 0.7% increase while the previous month’s figure was revised up to 0.6%. This might result to a recovery in risk sentiment for today, which might be negative for the yen.

Commodity Currencies (AUD, NZD, CAD)
The comdolls had a nice rebound to the dollar in recent trading, as the Australian dollar benefitted from the relatively upbeat RBA rate statement while the New Zealand dollar drew support from a stronger than expected rise in employment. Quarterly hiring increased by 1.1% while the jobless rate dropped from 6.2% to 6.0%, pushing NZD/USD back above the .8200 mark. There were no reports released from Canada recently and none are due today.

By Kate Curtis from Trader's Way