EUR As The Barometer

The EUR continued its slide against the USD on Thursday and will begin Friday near low water marks again. The GBP has slumped under the weight of the EUR performance as the U.K. ties to the E.U. via its banking institutions are correlated into the fix. The AUD however has somehow beaten off the slings and arrows of the EUR problems the past couple of sessions and managed to do better against the USD. This raises the question about if and when the AUD may find some additional pressure if the EUR continues to slump. The JPY did gain against the USD on Thursday. The JPY remains a solid fixture for Asian traders who are seeking a safe haven and for speculators who simply believe the Japanese currency will continue to hover near its stronger values no matter how much the Japan government does not like it. Gold as of this morning is around 1556.00 USD and has seen plenty of pressure this week because of the surging USD.

Traders know that today marks the last trading day of the year and that this will be another long holiday weekend. Volumes will once again begin to diminish as the day grows. The EUR has seen plenty of action this week and this may have come as a surprise to some who anticipated nothing but quiet markets. Even in what supposedly should have been a rather boring week of trading as attention was diverted elsewhere, the EUR was not able to escape the doubts that plague it. The E.U. has continued to come under a barrage of critics who believe that its leadership has not done enough to counter the financial crisis, and worse yet may not understand the problems that actually confront the continent. Some traders may be tempted to find a bounce in the Single Currency today because of the pounding it has taken, but there will be others who may find themselves positioning themselves against the EUR because of the long holiday weekend ahead.

There will be very little in the way of economic data today. The U.K. will see the Nationwide HPI, but this report is likely to go unnoticed in the grand scheme of things. The U.S. produced a better Pending Homes Sales number yesterday and the Chicago PMI beat its estimate. However the weekly Unemployment Claims figure was disappointing. The U.S. data outlines that the States finds itself taking two steps forwards and then taking one step backwards. And as much as the U.S. has done to try and create growth through the near zero interest policies of the Federal Reserve, it finds itself looking over its shoulder at the E.U. and worrying about contagion. Going into the New Year the USD will likely continue to find itself a safe haven bet among many. U.S. bonds continue strengthen also, which does not exactly show a mammoth amount of confidence in equities. Wall Street has essentially turned in a flat 2011 and with so many questions still lurking investors seem to be sitting on the fence waiting for proof that equities are a good investment tool.

It has been a difficult year for the global economy and a glance into the looking glass shows that the water remains murky. Europe is a pivotal measuring stick and investors need to see the E.U. create stability within its financial institutions. The Asian economies and even the American economies work in coordination with the Europeans on a massive scale, not only through trade but via its banking and management of international assets. The EUR/USD will continue to be a huge focal point for investors in the coming year and a key barometer regarding the dynamics of the global economy. Happy New Year to everyone and have a prosperous and healthy 2012.