Euro: No Bias Equals No Action

The Euro has weakened modestly against the US dollar following a surprising drop in German factory orders.  For the sixth month in a row, factory orders have been negative, which comes in sharp contrast with the stronger manufacturing PMI report released earlier this week. According to Goldman Sachs, European Banks may have to raise as much as EU90 billion euros to restore their balance sheets.  On Thursday, ECB President Trichet had his chance to engineer a new trend in the Euro. The market was looking for hawkish comments and if he delivered them, the EUR/USD would be on its way to a new record high.  Unfortunately Trichet gave currency traders little to work with by introducing two new buzz words - “no bias.” This proved to be the biggest disappointment for Euro bulls and unless Trichet reverses his stance, no bias could lead to no action in the EUR/USD this summer.  Since the beginning of the second quarter, the EUR/USD has been trapped within a 1.53 to 1.60 trading range and that range will probably remain intact until Labor Day.   Like the US, the Eurozone economic calendar barely has any market moving data.  German industrial production and the trade balance reports are the only numbers worth watching.  First quarter GDP is also due for release, but these are final numbers, which means that they should not be very market moving.  Meanwhile Switzerland will be releasing their unemployment numbers which are expected to trend lower.