Investors Waiting It Out
07-12-2011
Investors turned cautious in mass on Tuesday as the broad markets traded sideways. While the EUR, GBP, and AUD did pick up some ground the day’s results appear to be more about a range narrative. Global equities turned in mixed performances also. The European saga continues its soundtrack and as investors listen attentively, investors are also awaiting tomorrow’s ECB monetary policy meeting and press conference. The ECB delivered a semi surprising interest rate cut last month and spoke about the risk of a recession. Thus Thursday’s interest rate decision is being monitored for another possible move. Also the ongoing summit between Germany and France continues to offer insights into what is supposed to culminate into another set of pronouncements on Friday. And investors wait and watch.
Economic data proved uninspiring yesterday. Although Germany Factory Orders turned in a positive result, the broad European Revised GDP didn’t offer any signs of a turnaround. The U.K. saw the Halifax HPI and it underperformed slightly. Today German Industrial Production results will be released and the U.K. will bring forth its Manufacturing Production figures. The German number is expected to produce a 0.3% gain while the U.K. is forecasted to have a decline of minus -0.1%. It needs to be noted that the U.K. also has its BoE monetary policy meeting tomorrow. A change to its interest rate is not in question, but the tone of any statement may prove interesting. BoE Governor Mervyn King has not exactly spoken optimistically the past two months as he has warned about not only slow growth in the U.K. but the risk of contagion too coming via the European financial crisis if it erodes further.
The EUR saw range trading on Tuesday and it is likely to find this same path today as investors try to diagnose their short term sentiment compared to their long term outlooks. The GBP and AUD continue to trade under a EUR centric mode and this will stay in affect. Although it can be said, that there are interesting trading opportunities for the EUR/GBP pair for brave market participants.
The U.S will be quiet with data today with only Crude Oil inventories on the calendar. The USD has sustained a safe haven mode among many investors the past couple of months and this is probably going to remain the scenario for many – particularly when examining the U.S. bond market. While Wall Street turned in mixed results, physical resources also found consolidated results. Crude Oil remains near its highs but has not shown an ability as of yet to punch through the highs that it is bouncing near. Questions about the global economy are still a major concern regarding demand, but the price of Crude Oil has probably found some speculative backing based on the Iranian geopolitical rumblings. Data will stay relatively light from the States tomorrow with only the weekly Unemployment Claims really able to make a dent on sentiment.
The JPY remains in a consolidated mode. Trading remains unspectacular, but is in some respects a potentially good place to attempt range trades. The broad markets produced almost standstill results on Tuesday and may be rather quiet today if European officials can keep away from the microphones.
