The Risk Barometers
17-02-2011
The USD lost a bit of ground to the EUR on Wednesday, but the Greenback is still within known ranges against the Single Currency. The USD also traded in range against most of the other currencies. Essentially showing that Tuesday’s large amount of data may have been the climax of this week and has left the remaining days to prevailing sentiments and various risk events. The political upheaval in the Middle East has not caused tremors in the international markets this week, even though demonstrations appear to be growing in size and force in a handful of countries. The price of Gold is continuing to find footing and is trading around 1379.00 USD as of this morning. Crude Oil has remained calm and has even seen its price decline slightly in many aspects. Both of these commodities should be watched as an indication that the ‘risk barometer’ is changing.
Data from the States proved mixed at best on Wednesday. Building Permits underperformed, Housing Starts came up a bit better, but Industrial Production numbers were weaker. And yet Wall Street turned in a rather positive day on good corporate reports. Today weekly Unemployment Claims and the Philly Fed Manufacturing Index reports will be published. The jobless claims figures are expected to rise, likely because of holiday workers losing their jobs after the shopping season had come to an end. There are so many excuses from various officials in the States that pin pointing any pure reason for job loss, except that there is a lack of real job creation is hard to decipher. The USD has traded in a fairly moderate to solid range against the majors the past week. These next two days of trading before going into the weekend should be about risk sentiment.
The EUR and GBP both traded in well practiced channels on Wednesday. The EUR has maintained its value after slumping earlier this week. The Single Currency now finds itself solidly in a channel that will have traders pondering its direction. The GBP survived the Inflation Report from the BoE yesterday without any real setbacks. The Sterling like the EUR has found that it has rebounded from a slight dip in value earlier this week. The question that is being asked about both is if they will be able to sustain these values if risk sentiment grows uneasy. The U.K. will offer CBI Industrial Order Expectations today and a reading of minus -11 is expected. Tomorrow the GBP will get plenty of attention with the Retail Sales figures and Prelim Mortgage Approvals results getting posted. The Sterling may find itself within a cautious range today because of tomorrow’s impending publications.
The JPY traded as if stuck in mud on Wednesday. The JPY remains in a tight band, but its recent consolidation may allow traders to test its waters. The JPY has lost a bit of value to the USD in the past couple of weeks. The question many are asking is if it will start to gravitate towards the more valuable parts of its strong range again in the near term. The AUD gained yesterday, but ever so slightly. It too has been in a rather consolidated range. In short the broad markets appear cautious after having taken on additional risk in the past few days, the question is which direction risk appetite will turn in the next two days of trading. Perhaps traders should be asking themselves if it is easier to be nervous or positive in this particular trading environment.
