Economic Concerns = Caution

31-08-2010

USD

The USD continued its strong pace against the EUR and GBP on Monday as it moved to the stronger parts of it recent range. Safe haven pressure was the story of the day as Wall Street struggled and all the major indexes suffered losses. The U.S. released light data yesterday including Personal Spending and the results were near expectations. The gist of the day belonged to the languishing sentiment that has carried over from the negative opinions that have been expressed much of August. Today marks the end of the month and there are several rather interesting reports on schedule. The day starts off with the SP/CS Composite-20 HPI and will be quickly followed by the Chicago PMI reading. The CB Consumer Confidence data will then come out and after this the FOMC Meeting Minutes will be published.

President Obama tried to get into the act yesterday, but his speech didn’t warm the hearts of investors. The U.S. economy finds itself sitting in the midst of troubling circumstances. The data today will be important, but jobless figures begin in earnest tomorrow with the ADP report and will climax on Friday with the Non Farm Employment Change statistics. Yesterday’s trading volume on Wall Street was extremely light and this helped propel the market downward without much in the way of support. The FOMC Meeting Minutes may provide fascinating reading for observers today. Rumors have been rampant that the Federal Reserve’s ‘ruling council’ has not seen eye to eye recently and that the level of debate regarding policy has become heated. President Obama’s speech yesterday showed that the government has the ability to use rhetoric about joblessness, but the question investors are asking is what real possibilities exist to create not only stability but growth. The USD proved to be a magnate yesterday and it may continue to find backers if nervous markets persist.

EUR

The EUR lost ground to the USD on Monday as traders continued to have their concerns raised about the prospects of a knock on effect should the U.S. economy stumble. The Sovereign Debt issues within Europe in many respects have been continued to be pushed back and not discussed in full, but there is little to stop investors from the rationalization that a poor economy in the States will lead to additional tough times in the E.U. and therefore little in the way of growth. There was no major data from Europe yesterday and today will remain relatively light with the German Unemployment Change and Italian Retail Sales figures. The E.U. will also publish its Flash CPI Estimate today. Tomorrow German Retail Sales will be brought forth. The crux of the matter for investors this week will be the ECB monetary policy meeting on Thursday and what Claude Trichet has to say about the economic forecasts for Europe. The EUR will continue to find itself under a dollar centric mantra because of recessionary fears coming from across the Atlantic and the rather unsavory equation that this creates in the E.U when weighing austerity versus growth.

GBP

The Sterling once again lost value and finds itself languishing near its recent lows against the USD. There was a banking holiday in the U.K., but the GfK Consumer Confidence reading was published and had an outcome of minus -18, which beat the estimate of minus -23. However, the better result did not bring much cheer and today the Net Lending To Individuals and Final Mortgage Approvals data will be brought forth. Tomorrow the Manufacturing PMI report is on the schedule. Releases from the U.K. have proven a mixed bag for months and this is likely to continue. The Sterling did relatively well this summer on the heels of the new government’s austerity measures, but the GBP has come under pressure recently due to questions arising again about growth prospects. Like its counterparts, the U.K. finds itself in a tough position and investors remain skeptical about their outlooks. Risk sentiment is a critical factor for the Sterling and this will continue to resonate.

JPY & AUD

The BoJ has been met with a large amount criticism in recent days as it has proved again that it has little teeth and has not been able to defend the JPY. The Japanese currency continues to get stronger as investors continue to move towards the JPY in what are extremely cautious international markets. The AUD did gain a bit yesterday, but its movement is still very much in a rather known range. The question is when and how the AUD consolidation will end exactly – in other words impetus and timing are the key factors. Gold also continued to turn in flat trading and like the broad market this is because trading is tentative at best and waiting for the next big push.

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