Macro Still Unclear

Assumptions can be dangerous things and traders will have to be careful to not make them this morning, this because Gold and equities both had volatile trading sessions on Wednesday and their results must be closely inspected. While Gold declined in a rough manner it must be stated that part of the reason the precious metal came under immense pressure was because it’s minimum margin trading requirements were raised and this led to some investors deciding to close their positions. Gold no doubt has been a bastion of speculation, but it has also seen a vast rise in its value due to the uncertainty in the broad markets. And going into today’s session traders will have to ask themselves if long term the broad markets offer a clear perspective. It is likely the answer for economic prospects remains worrisome and therefore yesterday’s price action in Gold must be considered carefully. As for the equity markets, Wall Street started the day off on a strong note, but began to give back its gains as the day progressed. The news coming from Apple and the resignation of CEO Steve Jobs caused a stir late in the day and will continue to make headlines today.

The EUR/USD pair continued its consolidated range on Wednesday, but storms clearly persist. German President Wulff publically questioned the legality of the ECB bond purchases yesterday. If that doesn’t set off alarm bells among investors who are counting on the desire of European nations to quell concerns nothing will. The EUR somehow continues to muster strong results against the USD, but this may have more to do with the fact that the Federal Reserve in the States is viewed by many to be practicing a weak dollar policy. German Ifo Business Climate marks proved disappointing yesterday and signs continue to point to a slowdown economically in Europe. While France made it clear that they are going to seek new austerity measures, cynics were quick to point out that if growth lags and becomes worse that France will have a tough road ahead to accomplish its budgetary goals.

The U.S. released a better than expected Core Durable Goods Orders result on Wednesday, but the gains must be taken into the context that it was the broad report which saw the biggest jump and this came from the Transportation statistics which saw an increase in purchases for airplanes. The selling of airplanes is good, but the problem is that it might not be sustainable long term. Today the weekly Unemployment Claims will be released. However the crux of investors focus will be on the Apple story this morning and the economic symposium that is scheduled to get underway in Jackson Hole. Steve Jobs is synonymous with Apple and nervous investors sold off Apple late yesterday, the stock will likely find more volatility in the coming days. Ben Bernanke is set to make a major policy speech tomorrow among his central bank cohorts, the question is what exactly he will say and do. While many investors have expressed a desire for a new round of quantitative easing in order to help push equities higher, it is however no certainty that investors will get what they want.

The broad markets remain fragile and sentiment is not settled by any means. The GBP was slightly weaker yesterday and remains in a EUR centric mode. The AUD was stable yesterday in the wake of Gold’s sinking. The JPY did lose some ground but remains on the stronger side of its range. Crude Oil stayed in a consolidated range and highlights that no simple answers exist for investors. In many respects it is a traders market right now, opportunities exist because of the volatility and fact that ranges are continuing to be tested. We are well within the last few days of trading for August and many investors are still on holiday. It will be more than interesting to see how the markets play out as investors make their way back from vacation and judge what has been a confusing macroeconomic environment.