Risk, But For How Long?
11-10-2011
Perhaps the best thought about current market conditions is the old adage that hopes springs eternal. Based on that thought the EUR continued upwards momentum on Monday via the pronouncements coming from the E.U. and what has been a sudden emergence of risk appetite. Wall Street turned in a positive day of trading also in the States with its best performance since August. Germany and France have served at the forefront in trying to create more stability within the ‘confidence game’ regarding the financial crisis. Over the weekend the two nations said they will present a plan for creating a more solid base for banking, but until the package is made public concerns will be expressed. The simple fact is that governments will have to prove that they have the capability and credibility to bring about a seismic shift in the long term prospects for the crisis which still has many unanswered questions in Europe.
The EUR has done well the past few trading sessions, but traders who are taking a short term approach to the market based on prevailing trends may be asking when the Single Currency will run out of steam. The GBP and AUD both followed the EUR on Monday against the USD, and the major currencies are touching short term highs collectively versus the Greenback. The U.S. did not publish much in the way of data yesterday and the European saga remains at the forefront of focus. Having said that corporations in the States will be publishing their third quarter results in earnert in the coming days and weeks and it is the estimates from companies that will also begin to stir the pot. The U.S. has had fairly weak economic data the past few months and investors no doubt will be looking to correlate corporate outlooks with the overall pictures for growth. While Wall Street had solid gains on Monday its trading volumes remained low highlighting that not everyone has bought into this rosier picture.
The U.K. will publish Manufacturing Production numbers today, and tomorrow Europe will present inflation data, as the States follows up and brings forth the FOMC Meeting Minutes on Wednesday. The height for economic data this week may come only on Friday when Retail Sales figures come from the States. Market sentiment is clearly under the realms of the European debt situation of which officials are doing their best to shed a positive light on, but the broad markets remain on a razor’s edge and if a crack should appear in the armor it will not take long for a negaitve shift to occur. And this raises the question about the recent rally that has been seen in the EUR against the USD and the gains made on bourses. Is the spate of optimism really backed up by something concrete or is the market merely acting on hope?
Gold is trading around 1674.00 USD as of this morning and its rise must be monitored. Crude Oil has beat off headwinds and has shown a glimmer of strength the past few sessions. It will be more than interesting to see where the Commodity markets besides Forex trend today and tomorrow considering the recent gains of riskier assets.
