A Choppy Trading Road

Broad markets continue to display a rollercoaster like ride, along with a wealth of caution being spoken, as investors look for profits where ever they can find them. Risk appetite appears tentative and safe haven trading has certainly remained a magnet, having said that the EUR has done rather well taking into consideration that the news flow from the E.U. remains an endless road. As of this morning it is being reported that the Belgium bank Dexia has essentially agreed to have its infrastructure taken over by the Belgium government. Angela Merkel and Nicolas Sarkozy announced yet another plan to help buoy the European financial institutions over the weekend, but in what has become an ‘old song’ they essentially have failed to show anything in writing. Thus, we enter this week with the E.U. continuing to say they will confront and stabilize all financial problems and it will be up to investors to grade them through their choices in the marketplace.

The EUR did trade lower as Friday progressed, but has shown some signs of a bounce in early trading this morning throughout Asia and early European sessions. The question is how long optimism - or better yet this short term burst of stability – will remain. Trade Balance data will come from Germany today. The U.K. will see the BRC Retail Sales Monitor and the RICS House Price Balance readings. Both the GBP and AUD have found some takers and are at the higher values within their short term ranges. The U.S. will release no major economic data today and in fact will be rather tame until late this week when Retail Sales results will be published. The U.S. did present Jobless data this past Friday and the report was better than anticipated, but the outcome certainly was not enough to put a real dent in the overall unemployment percentages. The U.S. economy still shows signs of stagnation and Wall Street has reacted to this via a rather choppy road.

The GBP is an interesting currency. The BoE has been rather vocal about their concerns regarding the global economy and the problems that Europe faces. The BoE did add additional funding to their quantitative easing program last week. The Sterling which initially lost ground on the BoE statement quickly reversed however and began to show signs of strength. The problem for the GBP and what makes it interesting is that it continues to display signs of a EUR centric mode. The sentiment regarding the Sterling is a complicated mix of a poor economic outlook for the U.K. and troubling waters from nearby. BoE Governor Mervyn King has been rather outspoken in his criticism of the E.U. financial crisis and the GBP should be watched carefully as it tests its range.

The JPY remains landlocked in a consolidated range. The Japanese currency continues to find a mass of investors who are attracted to its ‘steady’ value and safe haven persona. The Japanese government appears to be somewhat comfortable with the current value and has done little to show that an imminent intervention is in the cards. As long as the JPY remains in this tight range traders may be tempted to partake in short term trades taking advantage of its rather strong equilibrium. The AUD like the GBP has found some recent backing and has crept upwards as a slight taste for risk appetite has entered the Forex markets. Gold is near 1651.00 USD as of this morning and appears ready for some type of break out if and when developments from Europe surge. The broad markets remain swift and traders should continue to practice an attentive outlook.