Consolidation For How Long?

The broad markets essentially became cautious on Thursday and turned in flat performances across the board. The EUR, GBP, and AUD all were range bound and equities were mixed. Wall Street saw actual losses and this suggest that risk appetite may find some roadblocks going into the weekend. Gold as of this morning is around 1671.00 USD which is a consolidated range too. Economic data that was presented yesterday was uninspiring. European inflation rates were around expectations and the weekly Unemployment Claims numbers from the States were still rather high, even though the result was a touch better than expected. Trade Balance numbers from the U.S. had little in the way of surprises. Today Retail Sales figures will come from the States and an outcome of 0.5% is expected for the broad report. Also the Preliminary Consumer Sentiment reading from the University of Michigan is on the schedule and a mark of 60.2 is anticipated.

Yesterday’s consolidated markets suggest that sentiment may be shifting once again. A rush of risk appetite was seen in the Forex and equity markets earlier this week and it will be more than interesting to see what positions are taken before going into the weekend. The data from the U.S. today are the biggest reports of the week and they could have an effect on Wall Street. Europe certainly continues to be a huge focus globally. And it must be said that some of the larger European banks yesterday issued a statement suggesting that the current plans being proposed by E.U. officials would leave banks facing the prospects of a credit crunch down the road. Also late yesterday Spanish bonds were downgraded. So as much as the E.U. was able to successfully play their Confidence Game cards this week, questions and concerns have not vanished by any means. The EUR has done rather well the past week as it has not only found stability but gained against the Greenback. Traders may be asking themselves how long the current value of the EUR can be sustained.

G20 meetings get started in Paris today and will last into the weekend. There should be little doubt that government leaders and officials will offer a wide range of opinions about the financial crisis in Europe and what it means for the global economy. The GBP has done remarkably well also the past week as it has picked itself off of the ground. The Sterling has turned in rather good results since the BoE monetary policy meeting last week in which the central bank issued new quantitative easing measures. The GBP is particularly interesting because the U.K. economy continues to struggle and its prospects for achieving growth seems limited in the midterm. Trade Balance numbers came from the U.K. also on Thursday and like their American counterparts offered little in the way of surprises. There will be no major economic data today for the U.K. and it is likely that the GBP will find its momentum from the EUR centric mode that still exists.

The JPY inched back to the stronger parts of its range yesterday and finds itself in its regular consolidated pattern. The JPY does have a group of analysts who believe long term that the Japanese currency should and must lose value, but until the global crisis subsides there seems to be little in the way of evidence that this is going to actually take place. The AUD like the GBP has done remarkably well as stability has entered the scope of investor sentiment the past week. But questions about the global economy continue to abound and as the Australian currency trades near its short term highs, the AUD may find some rather volatile trading if risk sentiment suddenly shifts again.

The broad markets were certainly quiet on Thursday, but as traders have experienced the past few months a quick burst of swift movement cannot be discounted. Investors continue to face tough long term questions and it is short term trends that traders continue to watch and take advantage of.