Opportunistic Ranges In Cautious Markets

09-06-2010

USD
The currency and equity markets traded in rather consolidated fashion on Tuesday. Market participants continue to exhibit nervousness and there has been little in the way of economic data so far this week in order to push them off of the fence. The USD traded in range against the EUR and GBP as traders displayed little conviction. Wednesday’s calendar will be rather light for data as Crude Oil Inventories and Wholesale Inventories numbers come forth, along with Beige Book figures. Ben Bernanke may find himself the focus for many in what may prove to be an otherwise quiet day of news. Tomorrow Trade Balance, weekly Unemployment Claims, and the Federal Budget Balance will all be reported and if today proves to be another tentative session, it could be Thursday that sees data cause an impact. Wrapping up the week on Friday will be Retail Sales and Consumer Sentiment statistics.

Thus, investors who last week reacted badly to a poor Non Farm Employment Change number may be holding their breath as they wait to see where American consumers are lining up (or not lining up as may be the case). The GDP from the States relies heavily upon the American pocketbook – as do many export nations – and unless people begin to spend more there stands the chance that stagnation will become the byword instead of recovery. Until powerhouse economic data is produced from the jobless front it remains doubtful that the Retail or Consumer numbers will astonish anybody. The additional problem now exist – which is still being played down by American officials – that if the European financial crisis truly ruptures and causes contagion, that international economies including the States are likely going to find themselves effected by the spillover and it will not be in a positive manner. The USD finds itself holding serve and traders in the meantime may find some opportunistic ranges.

EUR
The EUR managed to trade in range on Tuesday as investors cautiously moved in what are still nervous circumstances. German Industrial Production data was released and turned in a slightly positive outcome, but as mentioned yesterday the numbers were not exactly the talking point of the day. Instead what remains in focus are stories about Spanish banks and their liquidity and what are the real possibilities of a restructuring of Sovereign Debt unfolding among troubled E.U. nations. Tomorrow the ECB will hold their monetary policy meeting and press conference. And going into the event, investors will be well aware that the previous press conference did not go too well for ECB President Trichet who fumbled for answers and promptly sent the EUR into a spiral. The EUR finds itself at a critical juncture in terms of value and there can be no doubt that traders are viewing its current levels carefully. Europe will be quiet regarding data today and risk sentiment is sure to be determined largely by news and rumors that are circulating among market participants.

GBP
The Sterling, like its counterparts, found itself mired in a rather tight range on Tuesday. The U.K. will release its Trade Balance statistics today, but the likely focus of investors will be on comments coming from the government regarding fiscal policy and belt tightening. Also it would be wise to keep in mind that the Bank of England holds their monetary policy meeting tomorrow and will announce its outcome. Coming on the heels of the first full month in power for the Conservatives in their coalition it will be of interest for investors to see if the BoE and acting government see eye to eye. The GBP is still within the lower realms of its value against the USD. The Sterling has been under a steady shadow of Sovereign Debt questions because of the EUR centric sphere and high deficits in the U.K. - and this has proven a volatile mix.

JPY
The JPY and USD pair proved that in times of crisis that they can turn in a song and dance routine that becomes rather well practiced. The currency pair moved in a consolidated manner as Asian bourses reflected their international counterparts and proved almost mute. Investors globally have shown that they are waiting for impetus to make their next push. With the Central Bank meetings coming from the ECB and BoE tomorrow and Retail Sales data from the States on Friday, traders may see a push from these events. Until then the JPY will find itself under the spell of risk sentiment.

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