Tests Abound For EUR
29-12-2011
Investors dealt a body blow to the EUR on Wednesday as the currency found itself under pressure per negative sentiment continuing to mount regarding the E.U. financial crisis. Even as volumes remained thin, the orders that did come down the avenue were tilting towards the USD as a safe haven. The GBP followed the EUR lower versus the Greenback, meanwhile the AUD held on to its value a little better even though it declined also. Gold dropped to its low water marks and as of this morning is around 1553.00 USD. The precious metal has found itself under pressure as the strength of the USD has mounted. The JPY performed in a consolidated manner, but did inch towards a stronger value.
There was a lack of economic data yesterday from Europe and the U.S. yesterday. Today the German’s will present their Preliminary CPI report, while the States will bring forth weekly Unemployment Claims, Pending Home Sales, and Chicago PMI numbers. Yesterday’s fragile marketplace translated into a slide on Wall Street among the major indexes. Again, volumes remain ultra thin because of the holiday season, but the fact that traders have not been able to mount any type of significant gains in what usually becomes a rather optimistic time of the year does not exactly bode well for results in the months ahead. The European financial situation has not been able to escape the clutches of concern that shadow its banking, Sovereign Debt, nor its inability to generate growth as austerity measures mount. There are rumors circulating that Angela Merkel and Nicolas Sarkozy will hold yet another financial summit the second week of January.
While the data coming today from the U.S. on a usual Thursday would be deemed important, the question is who will be around to take account of it? And if investors are around to take various positions where will their collective attention be pinned? The overriding factor in the broad markets, including Forex, is the E.U. crisis and the perception that somehow the U.S. will be able to achieve some moderate glimmer of growth in the coming months. This is a dangerous counterbalance and the fear for many investors is the thought that if Europe is not able to contain its problems that they will seep into the global economy quickly and the American economy will take a hit.
Asia for all the talk that it is performing rather well even in the midst of this economic storm from Europe and the States, still needs both of these named spheres to consume their goods. If demand continues to fall off from Europe and the States, Asia also risks a downward economic cycle. Commodity prices have been a key barometer and many of the physical resources have gone into a sideways sprint since the E.U. situation has grown in stature. Crude Oil remains fairly high in value due to the political situation in the Middle East, particularly Iran, but if concerns should somehow subside in time - Crude Oil may find itself under pressure.
Tomorrow will be very light on data except for the Nationwide HPI from the U.K, meaning that today’s U.S. data and rumors circulating from Europe will remain the focal points for traders. Volumes will once again begin to diminish tomorrow as we go into another long holiday weekend. Trends must be watched carefully, and for the moment the EUR/USD pair remains of keen interest to most as tests abound for the Single Currency.
