EUR Still Vulnerable

Caution continued to rip across the broad markets and this helped spur the EUR, GBP, & AUD to new lows against the USD. Monday as a whole didn’t even seem to produce much of an upward attempt for range regarding the EUR as it appeared to be under pressure most of the day. The situation regarding the financial crisis in Europe continued unabated and yields on Sovereign Debt have caused massive unease among investors. While the United States has their own issues as evidenced by the inability of its Congressional ‘super committee’ to achieve an agreement on spending cuts, the European situation remains the critical lynchpin for sentiment. Ratings agencies were quick to say that U.S. bonds would not be downgraded last night after the ‘official’ impasse was announced in Washington regarding the lack of spending cuts. The rating agencies pointed out that automatic spending cuts up until now remain intact and that it they are allowed to work that this will be perceived as a good thing.

The U.S. will release Preliminary GDP today which could provide impetus. The broad markets are fragile at best going into today’s session. Wall Street had steep losses on Monday mirroring the declines seen globally in bourses. There will be plenty of data released from the U.S. tomorrow also, but it must be taken into consideration that volume from the States will begin to slip on Wednesday as investors make their exits for the holiday that will ensue on Thursday. Thus today could bring about volatility as positions are taken leading up to what is typically a long holiday weekend in the States. Investors will not be pleased with the political situation in the U.S, but at the same time investors are none too pleased about the dynamics among officials in Europe. The USD has a significant amount of backing on safe haven trading and it will be of interest to see how the Greenback responds today and tomorrow as investors question real market values in these turbulent economic conditions.

Europe will be light with data today, but tomorrow the German and French PMI readings will come via the manufacturing and services sectors. The E.U. is widely expected to continue its lurch towards a recession and Wednesday’s marks could be an additional dagger in the heart of the economic crisis in regards to overall confidence. The EUR has been taken to fresh lows and the question is how much pressure the Single Currency will continue to face as officials and governments try to get their act together. And therein is the problem, there is no unified voice coming from the E.U. and the lack of clarity on how the financial crisis will actually be dealt with continues to dismay investors.

The GBP and AUD continued to feed off of the negative frenzy from the EUR, and the fear that the global economy is sinking in terms of prospects have not helped the Sterling or Australian currency either. Public Sector Net Borrowing data will come from the U.K. today and the result is likely to show that the U.K. continues to struggle. Gold as of this morning is trading around 1684.00 USD and the precious metal continues to be put under pressure because of the ‘resurrection’ of the USD as a safe haven asset. Also the fact that inflation is not exactly the biggest concern at this point is playing into the downward slope on Gold. The question persists though about what will transpire if in fact the E.U. situation gets worse and then affects the U.S. growth prospects. But for the moment short term trading certainly rules and Gold is reacting to this like the broad markets. Crude Oil seems to have reached a peak in terms of the WTI price and has declined the past two trading sessions. Oil may continue to see further pressure if sentiment remains vulnerable.