Judging A Dangerous Game

The E.U. will begin their much anticipated emergency bailout meeting for Greece today. This is not a reprint from last year folks, this is the second emergency bailout that Greece is about to receive, and it may not be the last. The question is not if the leaders of Europe will produce confident statements, the question is if they will produce anything concrete. Greece is in dire financial shape and the likelihood that it will have to restructure some of its debt remains very real. Greece has the worst national credit rating on the globe for a reason among developed countries. The EUR/USD pair saw the Single Currency gain in value against the Greenback yesterday and traders should expect volatility today and tomorrow. Europe will release PMI Manufacturing and Services readings today, the important reports will come from Germany and France, but their outcomes will have very little relevance for traders today. The crux of the situation is that European leaders will be playing another round of their ‘Confidence Game’ today and traders will have to judge the results.

Wall Street turned in cautious outcomes across the major indexes on Wednesday and finished the day in red. Gold crept back above 1600.00 USD an ounce and remains glued near its record highs as safe haven seekers continue to back the precious metal.  Existing Home Sales numbers from the States fell far below their expectations yesterday, highlighting again for all that the housing sector in the U.S. remains in a seriously depressed mode and is having a difficult time picking itself off of the floor. Today weekly Unemployment Claims and the Philly Fed Manufacturing Index figures will be released. U.S. politicians continue to mount ‘talking campaigns’ regarding the upcoming vote which would increase the amount of allowable debt within the U.S. Budget. Some investors remain nervous about the ‘game of chicken’ politicians are playing in the States.

In essence both Europe and the States are playing dangerous games and investors are not reacting particularly well to the questions about debt, austerity, and economic outlooks. Politicians on both sides of the ocean are having an effect on the markets that has grown increasingly important since the onslaught of the 2008 financial crisis. The Forex, Commodity, and Equity markets are likely to be swift the next two days. As much as investors would like to start thinking about their summer holidays, they are unfortunately being put into a position in which preservation is becoming critical.

The GBP achieved some gains on Wednesday. Today the U.K. will release Retail Sales and an outcome of 0.5% is expected. Also Public Sector Net Borrowing figures will be released. It will be interesting to see what type of reaction the GBP has in the wake of the data taking into consideration the large storm that is brewing nearby on the European continent. The Sterling has stayed on the weaker side of its value against the USD for several months due to the rather dovish policy the Bank of England has embraced. A poor Retail Sales figure today could make the GBP weaker, particularly if it is combined with less than clear news regarding the E.U. summit. The Sterling is certain to see a test of its ranges today.

The AUD has been stable after climbing back to the stronger parts of its range on Tuesday. Wednesday’s price action in Gold certainly has added a footing for the AUD too. As of this morning’s writing Gold is around 1602.00 USD and is certain to get plenty of attention. Crude Oil remains in a consolidated pattern as traders try to ascertain the global economic outlook which remains unclear. The JPY has gotten stronger yet again. But that must be taken into the context that the movement in the Japanese currency remains rather tight when compared to many other currencies. The JPY continues to find backer among Asian investors who are seeking safe havens.