Swift and Hungry for Risk
19-01-2011
The broad markets proved swift and furious all of Tuesday. The USD started off on a stronger foot against the EUR, then lost momentum, and continued to test short term momentum late into the evening and the greenback finished in the weaker part of its range against the Single Currency. The day can best be described as watching true market forces emerge as risk appetite battled caution. The impetus clearly came from two sources yesterday in a major sense, the first part was the Apple story regarding Steve Jobs health and its good financial report, the second aspect was the ability of the ECB to continue to offer a positive spin on the Sovereign Debt situation and a good ZEW offering.
The German ZEW Economic Sentiment reading produced a surprisingly good result of 15.4 yesterday compared to the estimated outcome of 6.5. Also the broad European ZEW report was good too. The positive numbers provided an additional boost to risk appetite and the good results overall on the international bourses helped investor sentiment. The U.S. was quiet with data, but today the U.S. has Building Permits and Housing Starts to ponder. The U.K. will publish its Claimant Count Change figures. The housing data from the U.S. is not expected to be fantastic and carries mixed estimates compared to the previous month. Data has been inconsistent from the States the past month. Tomorrow the U.S. will bring forth its weekly Unemployment Claims and Existing Housing Starts statistics.
On the heels of volatile and swift trading Tuesday, the USD lost ground to the EUR and GBP and finds itself approaching the weaker parts of its range against the currencies. The question is how this rebound by the EUR and GBP will proceed over the next few trading sessions if risk appetite continues to increase. This because investors may begin to ponder where real values for the currencies should be, taking into consideration the mixed economic outlooks that prevail globally. Investing is largely a confidence game built on trust. With questions about the American jobless situation and housing problems, the debt crisis in Europe, poor growth prospects in the U.K., and inflation worries in China, traders must take advantage of short term moves and carefully consider long term implications.
The JPY and AUD continued to get stronger against the USD also on Tuesday. The JPY is safely within the stronger part of its known range against the greenback. The AUD rose back to the stronger side of its trend versus the USD. The AUD has done this as Gold has shown the ability to climb back to around 1374.00 USD an ounce and news from the flooding in Australia has been digested to a certain extent. The AUD remains an interesting currency to watch and its range will prove interesting these next few days.
