Risk Appetite Versus Caution
18-01-2011
As the U.S. took a banking holiday on Monday the broad markets turned in a collectively mixed performance. Currencies languished within known ranges as the USD essentially traded in a rather quiet manner versus the EUR and GBP. With no data coming from the States and only a minimal amount of statistics from Europe, investors participating in the markets were effectively left to sift through their sentiment. The biggest news from the day continued to be the Sovereign Debt concerns that shadow Europe. While the ECB has made it clear that they would like to see a new debt crisis strategy and have officially said they want a new aid package to be bolder and more complete, Germany continues to balk at many of the proposed measures. Thus, the meeting taking place to create more stability for the European bond market rescue and the EUR delivered a vague message of hope last night with little substance.
The USD and EUR will continue to have many investors watching them closely this week as risk appetite is weighed against caution. Both major spheres continue to face their own problems. While the U.S. is achieving better growth, it has chosen to basically spend its way out of the recession via the Federal Reserve, which makes for questionable long term prospects. Europe on the other hand has hit back with austerity measures in many nations as they battle perceived risks to budgets and they face challenging growth outlooks. Germany will see the ZEW Economic Sentiment reading today and its expected mark is 6.5. The U.S. will release its TIC Net Long Term Purchases statistics. Making news today will be the impact of Apple on the NASDAQ because of the news surrounding Steve Jobs health. Apple has reaffirmed it is in good hands from its leadership and its financials are strong, but some investors may become nervous as its corporate leader moves to the side once again.
The Sterling continued to enjoy some positive movement on Monday and the GBP finds itself nearing the more valuable parts of its range against the USD. Today inflation data will come from the U.K. in the form of the CPI and it is forecasted to have an outcome of 3.3%. Tomorrow the U.K. will publish unemployment data including the Claimant Count Change. The Sterling remains within a EUR centric mode and its recent gains have been reflective of the positive ride its major counterpart from Europe has benefitted from. While the GBP has done well the past week it also has many questions lurking and traders may be tempted to test its ranges.
Global equity markets were cautious yesterday with the U.S. on holiday, and Asia turned in rather mixed results on its indexes without any clear direction from the States. The JPY did get stronger against the USD and its range has been fairly consistent with its trading results from the past calendar year. The AUD has gotten stronger as the unfortunate flooding news from Queensland has been accepted and its economic impact is starting to be measured. Gold traded in a consolidated mode on Monday after losing ground for a few sessions and its holding pattern may prove interesting when it does break. The precious metal will be watched closely this week.
