The Risk Appetite Torch
21-02-2011
The USD continued to trade towards the weaker side of it its trend against the EUR and GBP on Friday closing negative this after putting up some fight earlier in the week. The USD is now at the weaker side of its range against most of the major currencies including the JPY and even the AUD. Today is a holiday in the United States and trading volumes will be light after the Europeans are finished with their session. However because of where the USD finds itself today’s trading will be on interest to all Greenback hawks – who have been pushed back lately. Europe does release PMI Manufacturing and Services Flash reports from Germany and France today and the results are expected to be near the previous marks. Also the German Ifo Business Climate report will be released.
The G20 meetings came to an end this weekend with plenty of talking points, but the so called agreements on trade imbalances still have to be played out in the real world and China would need to alter its currency policy which is likely not to occur anytime soon. Risk events going into this week remain the political tension coming from the Middle East, and talk surrounding the European financial crisis particularly concerning Portugal and Ireland. Though there is no data from the U.S. today, it will actually turn out to be a big week of publications from the States. Housing sector data will begin in earnest tomorrow the S&P/CS Composite-20 HPI with other related figures as the week progresses. And to finish off this coming Friday, the U.S. will release GDP numbers which will be watched closely, particularly because there have been rumors that the Federal Reserve has told banks that they are worried about the possibilities of a double dip recession.
Commodity prices have again found a push upwards. Gold is trading near 1395.00 USD as of this morning and the price of Crude Oil has found some upward movement, ‘helped’ no doubt by the news coming from the Middle East. In the meantime the AUD has kept a strong pace and remains near its highs. The JPY has been in a rather consolidated range, but appears to be leaning ever so slightly towards the stronger parts of its range against the USD.
The EUR and GBP have both done remarkably well even as data from the two spheres continues to show that economic growth remains challenging. Today’s PMI numbers from Germany and France should be watched for any negative surprises. The story surrounding the possibility that Portugal will find itself in economic chaos unless it receives a bailout package by the end of March should listened to carefully and investors should be weary. If history is any guide, both Greece and Ireland claimed up until the last moments that they were not in trouble either. The U.K. will be light with data today, and tomorrow the Public Sector Net Borrowing report will be brought forth.
With today’s holiday in the United States traders should be prepared for the broad market to be driven by the Europeans. The taste for risk sentiment has been largely driven by the Americans lately and it will fall on the shoulders of ‘other investors’ today to see if they can continue to carry the Risk Appetite torch.
