Despite there being a number of economic indicators reported yesterday the major pairs traded within a very narrow range and they appeared to have saved the big moves for this morning.
The falls appear to be a delayed reaction to yesterday as well further news from both eurozone and Switzerland. One of the reasons for the delay in the fall of the euro could be attributed to the fact that the market has been awaiting eurozone M3 money supply figure which was released earlier.
This is an interesting indicator which measures the value of all currency and liquid cash assets held by the public. A rising trend can have a positive effect on the nation’s currency and this morning’s number of 12.3% against the previous 11.3% and a forecast of 11.4%, should have resulted in a rise in the euro. The theory is that rising currency levels spur growth and have an inflationary effect, thereby leading to higher interest rates. However, the opposite view also holds inasmuch that an increased supply of money could trigger an equal drop in demand, leading to a lower currency valuation.
My reason for focusing on this singular indicator is to illustrate the point that in trading ( whether currency, stocks, shares, commodities etc ) you cannot make decisions based on one piece of news, or a single set of figures. Trading is about looking at the bigger picture and fitting the smaller pieces together to make up the jigsaw. The picture may be blurred around the edges, and some of the pieces may not fit very well, but at the centre there should be a relatively well defined image. The data out this morning illustrates the point that you cannot rely on one figure – clearly there are other factors at work in determining the overall direction for the Euro.