EUR Continues Its Run
24-01-2011
The USD continued to lose ground to the EUR and GBP on Friday as risk appetite continued to recruit new backers. Data was light on Friday, but what was published in fact showed that Europe is still not out of the woods yet economically. The German Ifo Business Climate reading came in at 110.3, which was slightly above expectations – but hardly anything to write home about. In the U.K. the Retail Sales figures were worse than expected with a result of minus -0.8%, below the estimated decline of minus -0.2%. Also the Preliminary Mortgage Approval statistics proved negative. Today Europe will lead the data parade with the PMI reports from the Manufacturing and Services sectors. Both Germany and France will be issuing their Flash numbers and the outcomes are not expected to be particularly good. Also making news today will be the political saga developing in Ireland regarding its leadership, which could make the markets a bit cautious.
However, the battle between risk appetite and nervous sentiment has decidedly been in favor of investors who have shown an ability to take on risk the past week. The equity markets have been more positive globally and bourses will have to be still monitored as an important barometer. Some have been ‘talking up’ the performance of the U.S. and its improving data, but housing remains a sore point. Even though the housing and building sector showed improvement last week, it is in essence beating numbers that have been more than beaten down. Tomorrow the U.S. will see the CB Consumer Confidence reading and the S&P/CS Coomposite-20 HPI. On Wednesday the U.S. will have New Home Sales results and the FOMC Statement. Thus, beginning tomorrow the States will have plenty of data for investors to sift through and make more of a determination about their personal outlooks compared to what official numbers and prospects are pointing towards. The USD finds itself on the weaker side of its range certainly against the EUR and GBP going into this week’s trading and the huge question is if the weakness seen in the short term is going to translate into a new and longer term trend.
The EUR continues to have storm clouds hovering and its Sovereign Debt questions have not been settled in any major way. Politicians and ECB officials have done a good job of bringing stability to the currency by maintaining a united stance in terms of rhetoric, but concrete fundamental changes to economic policy have not been agreed to as of yet. Greece and Ireland still face plenty of tough days ahead as they try to weigh austerity versus growth that has been slowed.
The JPY and AUD have actually found themselves in fairly consolidated trading the past few sessions and this may prove an interesting looking glass in the coming weeks. Gold has sunk to around 1348.00 USD as of this writing and it is certainly going to face a test this week and traders may be tempted to swim its waters.
