Market Standing On Its Head

The major currencies continued to have slash and burn trading ranges across the landscape. The USD traded at lows against the EUR and GBP before showing some ability to bounce back, but traders must continue to be tuned into the prevailing sentiment which remains tactical and nervous across the broad markets. Weekly Unemployment Claims were released yesterday from the U.S. and did show a slightly better number than expected, but as has been the story for months the result is NOTHING that can be held up as a sign that the American economy is experiencing a sharp and positive rebound. Today the Non Farm Employment Change numbers are on schedule and investors know this result will be critical before going into the weekend. The estimated figure is calling for a gain of 180k. However the whisper numbers have many braced for something worse. The jobless situation in the States remains weak and its direct effect on the American pocketbook is well known.

The EUR and GBP had their respective central banks enter the fray on Thursday without any real surprises. ECB President Trichet repeated what has become an international chorus while expressing concern about volatility in the currency markets. The U.K. did see the release of the Halifax HPI and it had a very disappointing result of minus -3.6%. The Manufacturing Production number from Britain did come in slightly better than expected. Also the German Industrial Production figures showed an improvement yesterday, but it is doubtful that these results were factored heavily into yesterday’s trading sessions. Both the EUR and the GBP remain under a dollar centric mantra in which the Federal Reserve from the United States apparently is holding many of the cards. German Trade Balance numbers will be released today and it will be interesting to see what effect the stronger EUR may have had on recent numbers.

The JPY continues to pick up strength against the USD and finds itself at highs. The Bank of Japan has shown a reluctance to intervene again and investors are showing that they still have a considerable taste for the JPY. The AUD was propelled to new highs also, but relinquished some of its gains upon the price of Gold coming down slightly in trading.

The crux of the matter is it that the broad markets are now in a state of heightened caution. There is a huge debate that is being played out among governments and their officials about the delicate art of currency manipulation in order to bolster economies. The G-7 will be meeting starting later today and the IMF is scheduled to meet beginning tomorrow. The rhetoric about ‘currency wars’ has been heating up as volatility has certainly increased. Global equities have experienced choppy trading this week, but have largely managed to hold onto their gains made in September. With today’s Non Farm Employment Change numbers coming forth from the States trading could look rather tranquil as positions are taken and road signs are interpreted. Short term trading has been full of opportunity for traders who have the stomach and will power to participate. For those with a longer term viewpoint the market may be appearing to stand on its head presently with so many questions still surrounding a wide swatch of financial institutions.

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