Central Banks The Focus

The USD lost more ground to the EUR and GBP on Monday, but not with the same vigor that it experienced last week. Wall Street slipped yesterday as equities found some resting ground, but this occurred after what has been a consistent month of gains since September got underway. The Dow Jones has gained well in the past couple of weeks and has managed to hold onto its momentum, the question is if this is a short term move or a reversal of sorts which points to another good round of buying in the bourses. There was little economic data released yesterday, but today the CB Consumer Confidence reading is on schedule and projected to have a mark of 52.5, which would be below last month’s outcome. Also the S&P/CS Composite-20 HPI will be published along with the Richmond Manufacturing Index.

The currency markets have entered a tidal pool recently and its shifts the past month are self evident. Officials from many countries are starting to rumble about currencies being manipulated in order to make their values more competitive for endeavors such as export in order to stimulate economies. The Federal Reserve is certainly one of the institutions that have been at the forefront, while quantitative easing may not be held to the same acid test such as the Bank of Japan’s intervention - it is still a strong method of making a currency weaker. Tomorrow will see no major data from the U.S., but on Thursday the weekly Unemployment Claims will be brought forth. Investors have turned their attention away from lackluster data in the States recently and seem to be more concerned about the gyrations surrounding what the Federal Reserve will do next. In the meantime Wall Street has managed to be not only stable but gain and the USD has moved towards the weaker sides of its trading ranges.

EUR
The EUR managed to have another good day taking into account that its value has climbed to the stronger side of its range versus the USD. There was no major data from Europe on Monday, but today the GfK German Consumer Climate reading is on schedule and is expected to have a result of 4.3. Also the German Preliminary CPI data will be published along with French Consumer Spending numbers. Germany and France are once again at the center of a debate regarding the management of economics in the European Union as they argue about sanctions that would be imposed for governments that break budget rules. It will be a relatively mute week of statistics from Europe after today until Friday’s German Retail Sales, but the crux of trading for the Single Currency is likely to remain a dollar centric attitude as long as the sentiment remains focused on the maneuvers of Central Banks.

GBP
The Sterling held onto its gains from last week on Monday and showed that its recent backing has not subsided. The GBP has performed well the past few weeks as it has increased its value based on sentiment coming from afar. Economic data from the U.K. continues to be lackluster like its counterparts, but the GBP now finds itself at highs. Today Current Account figures and the Final GDP statistics will be released from the U.K. and investors will once again get a chance to test their sentiment. However, the focal point for traders is likely to continue to be what is happening across the Atlantic, and until sentiment shifts away from what the Federal Reserve is contemplating and has been fully digested, there remains a chance that opportunities may continue to flourish for GBP traders who are willing to test its momentum. The question for the Sterling – like the EUR – is when attention will turn away from the whirlwind of chat about the Federal Reserve and once again become focused on the U.K. debt, lack of growth, and austerity measures that the nation faces.

JPY & AUD
The JPY continues to create a maze of questions for investors as it has ebbed to the stronger side of its value again. Investors are closely listening for any clues about another intervention from the BoJ, but they are also asking how much firepower the Bank of Japan has left. It is clear that the Japanese government does not want a strong JPY because of the damage it creates for its export companies, but its ability to fight the forces of global markets remains a challenge. The AUD hit new highs in trading on Monday as Gold surged to record highs. The Australian currency retreated a little in the late session as Gold came off of its record highs. The AUD and Gold are likely to remain interwoven in this environment.