A Long Day Of Vigilance

The broad markets turned cautious on Thursday as investors began to brace themselves for the results of today’s Stress Test results from Europe. While many consider these tests nothing more than a ‘confidence builder’ which include a curious mix of criteria that do not necessarily meet the standards of many generally accepted accounted principles, the tests will provide some insight for investors who believe they can decipher the numbers presented. The report will not come out until the major European bourses are closed today, which means if there are any surprises that fallout may not come about until Monday. However, the American and certainly the Forex markets will be active after the Stress Test outcomes are published and what may be rather consolidated trading could suddenly turn swift.

The Italian Senate passed austerity measures on Thursday which may help solidify the outlook for the Sovereign Debt saga in Europe, but the crisis is not over by any stretch and will be a continuous story for the months and likely year to come. The EUR did trade in a stable manner against the USD and held onto its gains from the previous day. Investors found some breathing room on Thursday regarding the Single Currency after three solid days of volatility and will likely see tight ranges for the EUR leading up to the Stress Test results today.

The U.S. released weekly Unemployment Claims and Retail Sales results yesterday and they both beat expectations, but not by wide margins. The debt ceiling talks in the U.S. continue to dominate the landscape and various government officials and politicians are making their viewpoints known via sound bites. Today the U.S. will release the Empire State Manufacturing Index reading. Last month’s manufacturing readings from a multitude of Fed districts proved disappointing, thus today’s results will be watched carefully. Wall Street turned in losses on Thursday and quarterly earnings will continue from the corporate front with the likes of Citibank reporting.  Rating agencies continue to offer a rather negative opinion about the shenanigans that are being played in Washington D.C. and have publically stated that if the debt ceiling is not increased and the States suffers any type of shutdown that its credit rating will come under review. The U.S. will also see Consumer Sentiment marks via the University of Michigan today.  The USD finds itself battling in range versus the EUR and GBP and traders will likely see a cautious test of ranges until the publication of the European Stress Test results.

The GBP found itself locked in a rather tight range on Thursday. The AUD continued to hover near the upper reaches of its range as Gold maintained the stronger parts of it highs. Commodity prices proved mixed and underscored the amount of cautious sentiment that exists throughout the broad markets.

Economic data from the major economies continues to provide rather downbeat outlooks. And the continued saga of debt fears from Europe and the growing concerns from the States has delivered no favors. The key barometer for traders today will likely be European equities and the price of Gold. Vigilance and patience will be needed. The Forex and Commodity markets are likely to range until investors get fundament answers from the Banking Stress Test from Europe, the results could change some existing notions, meaning that the markets biggest action will come much later in the day.