Investors Remain Cautious

USD

Economic data remained light on Wednesday and the currencies traded in range most of the day as investors continued to fret over the rather perplexing shadows being cast from the United States and Europe. The USD and EUR like most of the major currencies found themselves locked in a consolidated pattern and essentially sets up the final two days of trading this week to see if stability stays firm. The U.S. did release Crude Oil Inventories and the number came in lower than expected which helped the price of the commodity remain in higher end of its range at least for now. The U.S. will release weekly Unemployment Claims today and the expected outcome is 426k, which would be a slight improvement on the previous number. The jobless situation remains a critical lynchpin in the U.S. and the Federal Reserve is mandated to watch this number closely. The States will release Trade Balance and Preliminary Consumer Sentiment marks tomorrow. The U.S. bond market should be watched today also taking into consideration it saw swift trading yesterday with a large sell off.

The crux however for the USD remains not only the state of the economy, but the manner in which the Federal Reserve chooses to battle weak growth. Thus far the Fed’s perceived policy of throwing more money into the system has created equilibrium, but opponents argue that it is only prolonging the wound from healing properly. Quantitative easing – which is largely composed of purchasing government bonds – remains a hotly debated topic and again its results and prospects are not agreed on long term. The USD has done relatively well the past month and half, but this has come on the heels of a EUR which has found itself under the microscope. Wall Street did turn in a positive day on Wednesday, but its gains among the major indexes were not convincing.  The ‘confidence game’ among the broad market place has had to contend with a huge amount of news from government sources and investors remain cautious.

EUR

The EUR remains steadfast within the storm clouds of its own financial crisis which refuses to go away no matter how much public officials from the E.U. wish it were the case. The EUR has performed with relative stability the past week as the nervousness from the Irish situation has been digested, and fears of immediate contagion in the bond market among Europe’s nations has slowed. Slowed being the key work, because the fears have clearly not gone away entirely and European officials remain in meetings trying to sort out a plan that will be comfortable for all. The problem being that it is much easier to suggest ‘a plan’ than to actually impose one. Germany remains very much against having to be Europe’s banker and the question that investors are asking is how this screw will turn. Talk about enlarging the emergency fund that has been set aside by the E.U. for struggling European countries has been discussed but not approved. Data will remain light from Europe today and the focus will remain on the bullet points surrounding the fiscal soundness of the Single Currency.

GBP

The Sterling was able to gain some of its lost ground yesterday against the USD, but the GBP remains within range and its EUR centric shadow has yet to fade. The Halifax HPI will be released today and the Bank of England will enter the economic fray with its MPC monetary policy decision. The BoE is largely expected to maintain its current scope. University students in the U.K. are protesting in mass about the way in which austerity cuts are affecting them and though this will not affect the BoE, politicians are certainly watching along with the public. The questions surrounding the Sterling are the long term prospects for growth versus the amount of spending cuts that are being imposed. It remains to be seen which fiscal path will find the most success and officials, including those from the BoE, are under the glare of investors.

JPY & AUD

The JPY traded in a consolidated fashion on Wednesday as investors took a breather. The Japanese currency is in a known range and the question that traders have regarding the JPY is if it will finally break out of this old song and dance. Within the current economic atmosphere it is hard to believe that the JPY will do anything more than range trade. The AUD lost some ground yesterday as Gold slipped slightly and fell below 1390.00 USD an ounce. The next two days of trading for the precious metal will prove interesting.