How Much Steam Is Left?

The USD started off on a stronger foot Monday, but as the day wore on began to give much of its gains back and fell to the weaker sides of its ranges versus most of the major currencies. Pending Homes Sales data was released and came in better than expected, and Factory Orders were negative, but it was Ben Bernanke’s speech that once again reminded investors that many questions remain unanswered regarding the prospects for the American economy. The Fed Chairman said that the U.S. needs to tighten its spending, but on the other hand he also said that this must be done with extreme caution so growth is not obstructed. The U.S. will release ISM Non Manufacturing PMI results today and the estimated mark is 52.1. However, investors are likely to find that the Federal Reserve remains a talking point, along with the jobless data that is coming up from around the corner.

Wall Street continued to turn in rather muted results yesterday as the major indexes all stumbled. Commodity prices continue to get plenty of attention and Gold finds itself at record highs as rumors abound about high net worth individuals now seeking out the precious metal for cash preservation purposes. The AUD however went lower in late trading last night and early today as interest rates in Australia were kept on hold. While this may have an impact on the AUD, it may prove to be short term, if traders continue to look at the AUD as a commodity currency.

The JPY found a swift but limited range also early today as the Bank of Japan announced new measures as they actually lowered their main interest rate slightly and said they will press ahead with measures to try and stimulate what they publically admit is a struggling economy. The JPY continues to be mired within the highest parts of its value against the USD and the BoJ intervention a couple of weeks ago is now almost a part of history and its effect has proven lackluster.

The EUR and GBP continue to find plenty of backing on the heels of strong anti dollar centric sentiment which is being fueled by the belief the Fed in the U.S. will try to take part in more quantitative easing. But as some point out, this cannot be the only reason for such a move, and other factors must be weighed. The question is how long the EUR and GBP can continue their runs with large concerns still hovering over their own economies. The Sentix Investor Confidence reading from Europe proved slightly better yesterday as did the Construction PMI from the U.K., but neither should be enough to deflect from rather significant signposts that should be warnings of economic problems concerning growth, austerity, and debt.

Trading this week could continue to be volatile on many fronts taking into account the amount of nervousness being expressed in equities, commodities, and therefore the currency markets. Traders in many respects have seen a late summer rally in the stock markets and now must wonder how much steam is left in the engine with so many questions still in the financial world.

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