Stability Sought But Not Found

Stability will be sought by investors after two weeks of a rather volatile ride in the global equity markets. Gold as of this morning is trading at record highs, which underscores that sentiment continues to be nervous. There will be no major data releases today from either Europe or the States, but tomorrow that will quickly change as the Germans and French present Manufacturing and Services PMI reports. Later this week and hanging over investor sentiment with the potential for a major storm are scheduled speeches by Fed Chairman Ben Bernanke. And let's not fail to mention the continuing European debt saga which continues to produce fresh worries on a daily basis. This weekend German Chancellor Merkel made it clear that the German government has no intention of participating in a unified Eurobond. One last note per upcoming data is the fact that the Americans will present their Preliminary GDP number this Friday.

Thus Monday morning will begin with a worldwide display of investors nerves still frayed and without the promise of immediate stability. While corporations in the States continue to turn in rather good revenues, it is the potential that future earnings will not live up to expectations that has also haunted Wall Street. The additional notion that it is merely August will not comfort investors either, who know that historically it is late September and October which traditionally are the most volatile trading months. The Federal Reserve is widely expected to enter the economic drama that is unfolding – later this week – and present some type of stimulus package. The question that investors however will be asking is how much ammunition the Federal Reserve really has on hand after the two previous quantitative easing attempts.

The EUR/USD pair has been remarkable consistent during the recent upheavals in the equities. Both currencies have considerable dark clouds hovering above taking into consideration the financial worries in Europe and the fear that the U.S. may be slipping into another recession. Investors continue to receive a mixed bag of opinions regarding the future and until answers become clear it is conceivable that the EUR/USD will trade with a fair amount of counterbalance – that is until one of the issues from Europe or the States resolves itself in some degree.

The GBP has been fairly consistent against the USD also during the past two weeks as it has stayed in a fairly tight range. The U.K. economy like its major counterparts shows plenty of reasons to be concerned, but the Sterling has shown little in the way of offering anything divergent from the EUR and USD. The AUD has lost some ground to the USD and even as Gold has broken new highs consistently the Australian currency has shown the telltale signs that the prospects for the global economy are troublesome. The Australian economy relies heavily upon exports of its commodities and demand concerns have left some investors with the belief that the AUD may be vulnerable.

Safe havens such as the JPY and CHF have had plenty of attention and have been strong throughout these volatile weeks. The questions that investors have regarding these two currencies are focused on the rumors circulating from their respective Central Banks, which continue to try and weaken the JPY and CHF by suggesting that interventions are only a matter of time.

While the Forex market has remained rather stable during this period the Commodities have seen plenty of fireworks. Physical resources are directly affected by the prospects of demand. Crude Oil continues to find itself under pressure as questions grow about the global economy and this has put speculators on their heels. The price of WTI Crude Oil has slipped in the past few weeks from what had been a rather consolidated range.