Short Term Markets In Force
17-01-2011
The USD managed to find some stability against the EUR on Friday, but did go into the weekend on a weaker foot considering its overall performance. Today the U.S. markets are shuttered for a holiday, which will affect volumes dramatically as the European banks and bourses begin to close on Monday. The economic data from the States on Friday proved disappointing as Retail Sales and Consumer Sentiment expectations both missed their estimates. The main focus going into the weekend remained the manner in which the ECB was able to lend the EUR support through the combined efforts of bond auctions and the monetary policy meeting. Today data will be relatively light internationally with the American holiday. The U.K. will see the Nationwide Consumer Confidence reading and the RICS House Price Balance.
Talk today could center on European bonds, commodity prices – particularly among grains – that are causing rising prices in the food group, and the impact on sentiment. Risk appetite has shown signs of reawakening the past few weeks as the global equity markets have gained. However, with lackluster economic data being turned in from many corners of the world many questions remain unanswered. While politicians and government officials continue to put a bright shine on all things, in reality the recovery remains hard to attain in the U.S., the U.K, and Europe. Tomorrow the German ZEW Economic Sentiment report will be issued and the States will publish the Empire State Manufacturing Index. On Wednesday data will get more interesting with Building Permits and Housing Starts figures from the States and these numbers are not expected to add cheer.
The U.S. unemployment situation does not appear to be improving and consumers are still proving to be rather tight with their spending. The Sovereign Debt situation in Europe may have been handled well last week, but it may prove to be more of a short term remedy. Investor sentiment internationally remains on a razor’s edge and as markets return to full volume in the coming days trading is certain to become swift. One aspect of the overall markets is that although there have been extremely volatile moves on a daily basis the past year, in the end many of the markets have proven to have worked quite efficiently. The USD, EUR, and GBP have all shown the ability to trade in a fairly stable range taking into consideration a full year’s worth of trading.
With the U.S. on holiday it may prove interesting to see what happens with the EUR taking into consideration the Single Currency’s strong showing last week. The EUR was able to answer its doubters with resolve, but it is not out of the woods yet and will still face many questions. The GBP has done better too, but its EUR centric mode could leave it vulnerable if traders perceive that its gains were merely a short term showing.
The JPY finds itself within a tried and true range. This should not come as a surprise and traders will still find opportunities to test these consolidation points. The AUD fell back slightly as the price of Gold came under pressure. Gold finds itself around 1362.00 USD and it bears watching. Gold is now at the lower end of its range and it is certain to find a large group of onlookers who ponder downside risk compared to an upside trend.
