Consolidation In The Air

The USD had a mixed day of trading as it lost ground to the EUR, but essentially was stable against the other major currencies. Ben Bernanke spoke on Capitol Hill and offered no real surprises as he essentially reiterated the ‘party line’. Bernanke said that the Fed will continue with its quantitative easing policies, that the growth outlook remains one of improvement, but that concerns still exist with the jobless situation. Tension mounted for a moment when Bernanke challenged Congress to make spending cuts that would be credible. Today the U.S. will release weekly Unemployment Claims and Wholesale Inventories data. Wall Street turned in a mixed day of trading, this as the Dow Jones performed relatively well but the S&P and NASDAQ both were sluggish.

The U.S. economy continues to foster a variety of debates. While growth appears to be taking place, shadows remain regarding debt, pensions that will increasingly have to be paid out in the coming years as the baby boomers retire, a jobless situation that is high for American standards, and a housing market that continues to deflate. The USD is still the international reserve currency, but the American government – particularly the Federal Reserve – has continued to create a ‘softer’ USD via its quantitative easing polices. Tomorrow the Preliminary Consumer Sentiment readings will be presented. It appears that investors are focused on domestic agendas within the States and that risk appetite has jumped because of short term positive sentiment that is taking place via Wall Street. The USD finds itself within the lower depths of its recent ranges against the EUR and GBP, and for a capable and patient trader opportunities may exist via short term range moves.

The EUR traded stronger against the USD on Wednesday as the GBP lost a bit of ground to the Greenback. However, both currencies are clearly within practiced ranges and merely showed that ranges continue to be standard this week.  The German Trade Balance numbers were better than expected and the U.K. Trade Balance numbers disappointed. While Europe and the U.K. are being spoken about under the same light because of the heavily influenced EUR centric mode per recent trading, both economies continue to face tough questions like the United States. Growth remains sluggish on many fronts and tough austerity questions still must be dealt with as debts mount. Manufacturing Production numbers are on the schedule today from the U.K. and a gain of 0.5% is expected. The BoE is also set to release their monetary policy decision today, but little in the way of news is expected from this announcement.  Tomorrow will see inflation data from Europe and the U.K., which may prove interesting. In the meantime, ranges will likely continue to see back and forth action going into the weekend.

The JPY and AUD both traded slightly weaker on Wednesday against the USD. However, both currencies continue to stay near relative highs versus the Greenback. Gold, which climbed the previous day, basically traded in place and is around 1361.00 as of this morning. The broad markets have seen consolidation the past few days and risk appetite and caution appear to be battling for their collective footing. Investors who question the values of the current worldwide markets and have their doubts about the collective ‘speeches’ being made by government officials will have to wait for another ‘shoe’ to drop and bring impetus into the markets. Crucial barometers remain international bourses and earnings reports from corporations, which up until now have kept a relative amount of positive outlooks flowing. Confidence has been more in supply the past month, but the question is how long will it be able to maintain itself?