Market Ripe For Volatility
29-08-2011
As we enter the final week of the long August holiday for many investors, questions remain about the prospects for the global economy and financial crisis in Europe. Fed Chairman Ben Bernanke spoke on Friday and essentially said that he believes the economy is still achieving growth (albeit limited) and at this time the Fed doesn’t need to proceed with a new round of economic stimulus. Wall Street gained sharply on his remarks. However, highlighting that there is a strong contingent of doubters within the investment landscape Gold has once again perched itself near its highs and as of this morning finds itself around 1821.00 USD an ounce. In the meantime, the EUR curiously became stronger versus the USD nearing its short term highs. Yet again, the crystal ball for the EUR remains murky taking into consideration that the IMF head, Christine LeGarde, grabbed the spotlight this weekend when she spoke about the need for European banks to recapitalize and added that the luxury of time does not exist.
Thus the broad markets enter this week finding the EUR at relative highs, the GBP rather tranquil, and the AUD near short term highs. This has been accomplished on rather light holiday volume. As the Europeans begin to return to their trading desks as August concludes, the U.S. will get prepared to have their last summer holiday next Monday and with its culmination investors will once again be primed to work. With so many issues confronting investors upon their return what the reaction of the broad markets will be taking into consideration this month’s volatility is a hotly debated topic. The Forex markets have been relatively calm the past few weeks, but the EUR’s gains against the USD at the end of last week should be monitored closely.
The U.S. will release Pending Home Sales data today, but the focus will definitely be on Europe considering the amount of chatter coming from policy makers on the continent. Germany will release a host of data starting tomorrow and mid week with Retail Sales and GDP numbers. At the end of the week the U.S. will publish its Non Farm Employment Change data and these numbers could serve as a lynchpin for investors who are sitting on the fence trying to decide which direction their risk appetite is going to go.
Commodity markets remain mixed and Crude Oil leads the pack with consolidated trading. Oil has faced headwinds as stormy clouds have grown for the prospects of the global economy.
Japan held an election today which produced their sixth Prime Minister in the past five years. The JPY has not reacted to the election and remains staunchly within the stronger realms of its value.
As a barometer today market participants will watch equities and Gold attentively. Both have had a wild ride the past three weeks and conditions seem ripe for further volatility.
