Europe Is The Focus

The USD saw volatility become its friend on Tuesday as it gained with rapid force against the EUR and many other currencies. The Irish financial situation remains a critical element of poor sentiment for the European currency and its overhang had a negative effect on the GBP also yesterday. Wall Street turned in a downtrodden performance in the States as well as the major indexes sunk. The U.S. released GDP numbers yesterday and it came in with a slightly better result of 2.5%, beating the estimate of 2.3%. However Existing Homes Sales underperformed and missed its anticipated figure coming in with an outcome of 4.43 million. Today the U.S. will release a host of data including the weekly Unemployment Claims, Core Durable Goods, New Home Sales, and Consumer Sentiment numbers. The reason why so many important reports are coming out on one day is because of the Thanksgiving holiday which will start on Thursday. It is important to note that many investors will leave their offices early today and not return to their trading desks until Monday morning at the earliest in the States.

Because of the upcoming holiday, trading volume will begin to drop off later today and the broad markets will be left to trade on European and Asian sentiment in a major way for the next two and a half days. Opportunities could exist the next few trading sessions as institutional investors disappear, leaving the door open for some traders to take advantage of a thin marketplace. The markets did see divergence come into the markets yesterday, this occurred as the USD gained and Gold followed suit – meaning that the precious metal actually climbed.

The reason for Gold’s climb on Tuesday may come down to two things, first investors are concerned about the health of paper money and the questions surrounding the EUR have left few feeling comfortable. Also the heightened tension in the Koreas certainly provided another reason for a flight to quality. The big picture has certainly shown that risk is being pulled off the table the past couple of days and this has largely had to do with the Sovereign Debt questions hovering over Europe once again. Investors are openly questioning how government officials can be believed taking into account that two European countries have now slipped publically proving that they have not been able to take care of their own financial difficulties. Investors are now viewing Portugal and Spain with a great deal of suspicion. Banking institutions on many of the European bourses traded weakly on Tuesday.

The German Ifo Business Climate reading will be released today. And from the U.K. the Revised GDP will be brought forth. Tomorrow will be a quiet day of data with the U.S. shuttered, but the U.K. will publish its CBI Realized Sales. The focus will continue to be on European officials however, who will certainly make their way to various podiums and deliver their thoughts on the EUR and fiscal policy.

The JPY traded in range on Tuesday and this should raise some eyebrows considering that neighboring countries, South Korea and North Korea, are experiencing an escalation of tensions. The JPY has held onto to its value the past week even as the USD has strengthened against many other major currencies. This may highlight that the JPY is not going to veer too far from the stronger side of its range. The AUD traded slightly weaker yesterday and offers a complicated set of questions for traders who must decide if Gold’s surge yesterday will be sustainable and how this will counterweigh against risk aversion which has also made the USD stronger. Traders must remember that weaker volume will become part of the equation later today and they will have to be ready to react.