The Magic Coin

Like a magic coin the EUR continues to mount gains versus the USD.  The GBP, AUD, and equity markets have followed the Single Currency too.  As risk appetite has increased it should be pointed out that the JPY has also somehow climbed to its strongest values. Europe continues to hold its economic summit after this weekend, and while the E.U. has announced some agreements, the final outline has certainly not been produced. While the financial crisis has seemingly taken on the look of possibly being resolved by the E.U., questions remain about not only authenticating but the capability of making the programs work. Investors have sent risk currencies within Forex such as the EUR to short term highs against the Greenback and this has come on the heels of victorious rounds by the E.U. as they play their ‘confidence game’.

While the rally in currencies against the USD has been notable, so have the gains being made in the States on Wall Street. For nearly all of October now the major indexes in the U.S. have done remarkably well taking into account the declines seen in August and September, and the gains seen this month have been nearly 9% across the Dow Jones board since the month began. The result is nothing to sneeze about for traders who had the ability to buy into the market at the start of the month, but plenty of investors continue to have concerns about the long term viability of a sustained rally.  Quarterly earnings from the States have done reasonably well taking into consideration the amount of negative sentiment that has been in the market regarding outlooks recently. Corporations will continue publish their accountings today.

The focus in many respects however will continue to be Europe. And thus far the E.U. is managing its propaganda machine remarkably well taking into consideration the storm clouds that have been hovering around it. The E.U. has allowed short term traders to take advantage of perceived lower values in the EUR, GBP, and AUD. All three currencies have done remarkably well the past two weeks after the beatings that they took previously. Today Flash PMI Manufacturing and Services reports will come from Germany and France. But the height of attention paid to Europe will be towards the ongoing economic summit which is probably going to climax this Wednesday.  The U.S. will be light with data today. Tomorrow the CB Consumer Confidence survey will be released. However, it is Thursday that may provide some fireworks for investors when the Advance GDP numbers come from the States.

Gold has continued to trade in a relatively tight range and as of this morning its price is about 1653.00 USD.  Other commodities have seen volatile trading as sentiment has swung wildly the past week. Crude Oil is trading near short term highs as risk appetite has certainly shown signs of making its mark on the physical resources.

Talk about intervention continues to mount regarding the Bank of Japan as the JPY continues to get stronger against the USD. Leading exporters have publically called on the JPY to be made weaker and traders should stay alert to any attempts that may make this actually take place. The Swiss National Bank should serve as a reminder that central banks are able to muster large moves when they put their mind to it. The question is what type of ammunition does the Band of Japan actually have?

While risk appetite has certainly won recent battles, there are still many cynics abounding who are waiting in the wings. And this in essence makes the broad markets what they are as participants debate their economic outlooks via their financial allocations. The E.U. summit is sure to remain a focal point until at least Wednesday and traders need to remain alert to all developments which could come quickly.