Euro collapses as Trichet proves to be a big disappointment (page 2 of 2)

For a staunch inflation fighter, it is quite uncharacteristic to have no bias especially on a day when oil prices hit a new record high.

German factory orders are due for release tomorrow. A strong rebound is expected but that may not have much of an impact on the Euro. We expect a bit more weakness before some stabilization in the EUR/USD.

Pound Sterling: Economic data continues to worsen

The British pound extended its losses as bad news continues to pour out of the UK.

Service sector PMI fell to the lowest level since October 2001.

This is the first time in seven years that there has been a contraction in service, manufacturing and construction sector PMI.

Back then, GDP growth slowed to 0.1%, the lowest level since the second quarter of 1992. These numbers explain why the Bank of England has been so reluctant to raise interest rates.

They know that their economy is in bad shape and that the downturn is deepening. We expect the UK labour market to fall into the same downward spiral as the US labour market.

Many of the jobs that have been cut in the financial sector have been worldwide and London will feel the same pains as the US.

Australian, New Zealand and Canadian Dollars hit by US Dollar strength

Broad dollar strength has pushed the Australian, New Zealand and Canadian dollars lower. T

he Australian trade deficit was slightly wider than expected as exports slow and imports grow.

Like the rest of the world, oil is the primary culprit. With Australia now back to running a trade deficit, second quarter growth remain soft. In the first quarter, the Australian economy actually grew by the slowest pace in two years.

Interestingly enough, commodity prices were unchanged in the month of June. The annualized pace of growth still remains near record highs.

Canada is the only country with any meaningful economic data tomorrow. The IVEY PMI report is due for release. Although a dip is expected, the index should remain near its 11 months highs.

No blowout moves in the Japanese Yen

The US dollar was itching for a breakout against the Japanese Yen prior to the non-farm payrolls report.

Even though a breakout did occur (from the triangle formation), the rally was modest at best. Resistance is still at 107.20 and with the US markets closed for Independence Day tomorrow and no meaningful data due for release next week, the currency pair will probably remain trapped within its 105 to 108 trading range.

It is worth noting that CHF/JPY hit a 17 year high this morning, but the gains were quickly erased after the NFP release.