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Draghi May Struggle to Maintian a Balance in his Tone – June 6

June 6, 2013
In my yesterday’s post I said that I will be closely watching ADP Employment & FED Beige Book data for more clues about the US economic performance. Though ADP Jobs was a bit disappointing, but Beige Book that had notes covering from April 5 till May 24 was comforting in the sense that it did not contain any warning signs. Instead the language used was encouraging highlighting hiring, it said consumer spending has picked up, there has been moderate rise in car sale, it praised construction and real estate sector, where as manufacturing sector picked up in most of the Fed’s 12-districts. Just keep in mind about the duration of Beige Book that did not make any negative comments about the economy and during this period US economy was faced with Sequester and Tax reform issues. 
However, tomorrow’s US payroll will definitely provide a better picture and today’s initial jobless claim could be the trend setter. If we have a closer look at the release of this week’s economic indicators, then claims should rise to around 360 K, but anything around 335-340 K or below could turn out be good news for tomorrows payroll data.    
The other big events of the day are BOE and ECB policy rate announcement. Bank of England is unlikely to make any change in its monetary policy, as the economic slide halted for the moment. Furthermore, the timing may not be appropriate due to change in its leadership that will soon take place. 
ECB’s policy announcement, to be followed by Draghi’s meet the press will the major event of the day. This may not be the easiest day for Draghi to maintain a balance in his tone, as his approach has been Dovish recently that met resistance from his ECB colleagues. The real focus will be on the language about ECB intention on its negative deposit rate plan. He may try to buy time, as the European economy has shown minor recovery, but the gains are not enough, as European economy is still in hot waters and may require more serious monetary measures than all the talking. 
Asia or early Europe could be slow in trading, but as the day progresses we should be heading for a choppy day. 
Twitter    @asadcmka            for Currencies & Gold Update
GMT 2:30  – EURO @ 1.3090 = Prior to ECB announcement we could be trading in a 1.3050 – 1.3150 band with bias on the upside. But key levels are 1.2970 and 1.3250. Any move beyond 1.3220 would be risky to sell.
GMT 2:38 – GBP @ 1.5393 = Wild swing is possible, support 1.5340-50 may hold until policy announcement and Cable could surge to test 1.5460 zones. However, if up move occurs 1.5480-90 may not be easy to crack as would see strong selling interest. Below 1.5310 would risk for deeper fall.
GMT 2:43 – JPY @ 99.22 = Yen needs to break 98.70 for more gains towards 98.40, but break of 99.60-70 levels will encourage for a test of 100.40.
GMT 2:48 – AUD @ 0.9478 = Aussie could take a breather around 0.9440-50 levels, but needs to push beyond 09530-40 zones for more corrective move or else 0.9410.
GMT 2:55 – GOLD @ $ 1400.60 = Gold should hold around $ 1406-08 levels or could see a move towards $ 1415-18 zones. On the down side break of $ 1388-90 is required for $ 1375
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