EUR Shadows Linger
17-05-2011
Risk adverse trading dominated the broad markets on Monday leaving most of the currencies in range bound motion. The USD started the day off on a weaker stance, but as the day wore on pushed itself back to values it had nearly started the day with. The EUR continues to be the focus for many Forex traders regarding sentiment. Portugal, Greece, and the next in line for the helm of the ECB all made news yesterday. Portugal apparently has taken a step closer to finalizing its bailout package, Greece continues to be watched keenly as its next moves are contemplated, and the Italian Mario Draghi appears next in line to become the ECB President. The news surrounding the Managing Director of the IMF also continued to make news on Monday. All of these elements add to a rather unstable storyboard for the EUR and certainly will add to the tentative nature regarding Euro Zone outlooks.
The U.S. released the Empire State Manufacturing Index on Monday and it proved disappointing with a reading of 11.9. Wall Street turned in another negative day of trading and going into global equity sessions this morning investors appear cautious still. The U.S. will release Building Permits and Housing Starts data today. The housing sector remains a critical lynchpin in the States and shows little signs of reemerging with stunning success. The Building Permits estimate matches last month’s outcome of 0.59m. Tomorrow in what could turn out to be a rather interesting moment for impetus, the FOMC will release its Meeting Minutes, which could offer some insight into the mechanisms of the Federal Reserve and its thoughts on quantitative easing. Thursday will see Existing Home Sales figures and the Philly Fed Manufacturing Index results.
The USD has held its ground taking into consideration the gains it has made the past two weeks. The sudden shift in sentiment has plenty to do with the realization that the Greek saga is beginning to look like a never ending affair. The latest rumors surrounding Greece is that the E.U. may be asking the nation to perform ‘haircuts’ on its bond yields, which has politely been presented as a re-profiling as opposed to a re-structuring. The news that surrounds the Strauss-Kahn allegations could have consequences for the Sovereign Debt situation in Europe also taking into consideration the influence he had in recent negotiations as the IMF leader. Today the German ZEW Economic Sentiment reading will be presented and carries an expectation of 4.8. However Greece will continue to be the focal point for many investors, as European officials and politicians try to create a more secure ‘confidence game’.
The GBP continued to slide against the USD under the shadow of a EUR centric mode. The U.K. will present inflation numbers today via CPI results and then the Bank of England is likely to issue their Inflation Report. The BoE has been taking the stance, much like the Federal Reserve in the States, that inflation although it remains higher than wanted will eventually prove transitory and lessen. The Sterling faces a stiff wind and has yet to break free in any kind of divergent manner from the EUR.
Commodity markets proved tentative as Gold and Crude Oil both remained in tight ranges. Gold as of this morning is trading around 1493.00, nearly matching its value on Monday morning. The AUD also found itself in a rather cautious trading pattern. The strong AUD continues to get plenty of attention and the question now for traders may be its ability to hold its value if physical resources actually come under more pressure. The JPY did trade slightly weaker against the USD on Monday and early this morning and attentive traders who are able to patiently trade its ranges may find some opportunity with a possible retracement.
