Euro Shrugs Weak PMIs, Awaiting ADP, FOMC

Euro Stronger Despite Weak European PMI; ADP And Fed decision are due for today.

German labor market weak; European manufacturing PMI disappointed; UK construction PMI rose. Market turns to ADP and later during the NY session to interest rate announcement and the FED press conference.

The USD is mixed today. It is weaker against the EUR, CHF and JPY and slightly stronger against the other majors. European equities are in red by about 0.25%.

European data was disappointing today. The number of unemployed people in Germany increased by 10K in October after registering a 22K decline in September. The unemployment rate increased to 7% from 6.9%.

PMI data provided no reason for optimism either. Italian manufacturing PMI plunged to 43.3 from 48.3, French PMI increased slightly to 48.5 from 48.2 but stayed firmly in the contraction territory. German manufacturing sector contracted as PMI printed 49.1 from 50.3 and finally Eurozone PMI declined further to 47.1 from 48.5.

The outlook for Europe continues to worsen as even Germany, Eurozone's engine, faces serious fundamental deterioration. Contracting manufacturing sectors, weak labor market and poor confidence imply stagnation at best and the risk of a double dip recession increases with each disappointing data release.

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Meanwhile, the German-Italian 10 year spread reached the highest level since Euro inception as Italian 10 year yield continues to rise and trades at 6.17% which is by many analysts considered unsustainable. As has become the norm, the ECB continues to buy Italian and Spanish bonds.

In the UK, construction PMI surprised to the upside when October figure printed solid 53.9 from previous 50.1. GBPUSD briefly jumped higher from 1.6020 to 1.6050 but has since retraced all gains and trades below the pre-announcement levels.

The New York session starts at 8:15 am ET with October ADP report that is expected to increase to 102K from previous 91K.

TAKE NOTE: Bear in mind the interest rate announcement of the FOMC statement is due at 12:30 pm ET (16:30 GMT/London), followed by the Bernanke press conference at 14:15 (18:15 GMT/London). Traders will shift their concentration from Greece to the FED to search for QE3 clues. Any mention of QE3 remains unlikely and should the FED decide to bring up additional easing, it will probably emphasize that is will be contingent upon future developments. The fed funds rate will stay below 0.25%.