A Day For Policy Makers

08-09-2011

It will be a day highlighted by policy makers around the globe. The ECB holds their monetary policy meeting today and press conference. From the States Ben Bernanke is scheduled to speak about the economy early in the American day and tonight President Obama is penciled in to speak about the jobless situation. The equity markets in the U.S. turned positive yesterday, but one day of gains does not mean that a bull market has suddenly emerged. The EUR and GBP both continued to trade in the weaker realm of their recent values against the USD. Gold has turned in nothing less than a wild ride and as of this morning is around 1836.00 USD an ounce, but that can change quickly. Trading should take on a very cautious tone taking into consideration the amount of policy makers that will be making their way to the microphone today and offering their viewpoints. What the three men will say exactly is the billion dollar question. Even though the questions remain the same, it is not known how Trichet, Bernanke, or Obama will present their version of the ‘confidence game’ that is in effect.

And the confidence game that continues its saga in Europe remains murky. The German court yesterday essentially said that it was OK for the government to allow for financial aid regarding the Sovereign Debt crisis. However the court added that in the future all aid packages would have to be approved by the German Parliament. Also whispers continue to run unabated regarding the dilemma that Greece faces regarding their economic prospects and their ability to meet their stated goals. ECB President Trichet will be certain to face a stern amount of questions, but he is a skilled technician and is likely to sugarcoat this torrent of financial storms. What will be of interest is to see how clearly Trichet speaks about bank liquidity, growth, debt, and the coordination (or lack of) between the E.U. member nations.

The U.S. will release weekly Unemployment Claims numbers today however with President Obama scheduled to speak about the jobless problems in a televised national speech tonight the data will take a backseat. Investors are likely to remain hesitant regarding their positions as they await confirmation from Bernanke and Obama about their stated intentions. The USD has been stronger against the EUR and GBP, but it has not powered to new highs, and the Fed’s prevailing weak dollar principles remain tangible.

The AUD consolidated on Wednesday and is likely to mirror the sentiment that is translated into the markets as the day progresses. Until then the AUD will see a polite test of its ranges. The JPY has firmed near the weaker parts of its strong range and like the AUD awaits fallout from the list of speakers that will make their way forward today.

The GBP has continued to stay on the weaker side of its value. The U.K. produced further lackluster economic data from the Halifax HPI, while its Manufacturing Production numbers matched a very modest expectation for growth. The Sterling remains locked in a EUR centric slumber. The question for the GBP is if and when divergence will emerge with the EUR if the E.U. financial crisis were to deteriorate. The BoE will issue its policy today, but no major changes are anticipated.

Investors globally today will be watching for signals from Trichet, Bernanke, and Obama. It is likely that traders will walk away from the 3 pronouncements with many questions unanswered in reality, except to say that the officials will try their best to cast a positive spin on what has become a leaky ship.

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