Safe Haven Trading In Vogue

23-08-2010

USD

With little in the way of data and only existing sentiment to trade on the USD moved to the stronger realms of its value on Friday against the EUR and GBP. Wall Street continued to turn in lackluster results and the greenback seemingly found safe haven backing before going into the weekend. The question hovering over investors internationally is what the impact from another economic downturn in the U.S. will cause. It is one thing to say that American consumers will further restrict their spending, but another unknown calculation is what would become of the tax bases that governments worldwide rely on to maintain their debt. Today will be a quiet day of releases from the States, but tomorrow the Existing Home Sales will be published and on Wednesday New Home Sales figures will come forth.

Entering the final two weeks of summer before the Labor Day holiday in the U.S., investors have proven rather unconvinced about brighter prospects for the economy. Wall Street has basically stumbled since the spring and it results last week will provide no comfort. Election season is also another important ingredient that will have to be watched the next few months until November. The possibility of the White House losing its mandate could certainly prove to be an incredibly important part of investing. Thus, with the speculation that prospects will be tone downed from the corporate front and the inclination that third quarter results are going to show a struggle, investors cannot be faulted for pursuing a cautious trading mode that includes a safe haven philosophy. Trading volumes remain low and ranges will certainly continue to be tested short term, but the midterm prospects for the USD remain stable to good depending on the currency pair.

EUR

The EUR continued to lose ground against the USD on Friday as sentiment among investors displayed distinct signs of a ‘flight to quality’. While Germany continues to express the opinion that their growth forecasts are going to be met and possibly even bettered, other nations are beginning to make it clear – such as France – tougher days are ahead. There was no major economic data on Friday from the E.U., but today a host of PMI reports will be brought forth from Germany and France. The Manufacturing and Services Flash readings will be watched carefully. Tomorrow Industrial New Orders will be published for the continent and on Wednesday the German Ifo Business Climate numbers will be issued. The EUR has struggled the past two weeks as a cautious wind has started to blow. While Sovereign Debt concerns are not being expressed in the same manner they were in the early spring, fears of another economic downturn are proving cumbersome.

GBP
The Sterling has been put on its heels the past couple of weeks on risk adverse trading. It may prove to be a rather light week for data for the GBP up until the Revised GDP numbers on Friday. Today there will be no data and tomorrow the BBA Mortgage Approvals will be published. Essentially the Sterling finds itself being traded in a whirlwind consisting of concerns about growth versus austerity measures. Like other counterparts, the U.K. is also under the shadow of a possible downturn occurring in the States and the impact that this could cause. The GBP has had a good summer of results against the USD, and the question is if there is any gas left in the tank for the Sterling - or will safe haven trading rule.

JPY & AUD

The BoJ failed to prove that it had any bite this weekend and certainly did not come close to saying that it had the power to intervene in the JPY, which continues to prove a magnate for Asian investors seeking a safe haven. The AUD has lost ground in trading as the election results from Australia remain uncertain. Investors certainly will not be happy with an unclear outcome and until clarity is provided the AUD could prove to find itself under pressure. Gold remains in a tight range around the higher realm of its value and it appears traders are waiting for another push.

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