The USD has traded in a slightly stronger short term range the past day and a half as some investors have questioned the amount of money that the Federal Reserve will use in its quantitative easing scheme. Also added into the complex mix of sentiment, is the thought that the USD may have seen most of the Fed’s policy already digested. Having said that, the rather loud discussion about global currency manipulation continues to make waves and the Chinese / U.S. debate about policies has found many spectators. The weakness of the USD continues to stir fears among other nations, which are heavily pegged with the USD as they watch their own currencies gain and throw doubts about growth into their own economic prospects.
Wall Street stumbled on Tuesday as Building Permits figures came in worse than estimated and quarterly earnings from certain companies have not been good enough. The news was not so fantastic from Europe either regarding data as the Current Account balances for the continent and the German ZEW German Economic Sentiment reading were both negative. Also strikes continue to plague some nations on the continent. However, the EUR weakness and that of the GBP have to be taken with a grain of salt in the current trading environment as it appears that fundamental data have little to do with sentiment for the time being. It will be a quiet day of releases from Europe like the United States, but the U.K. will offer a full plate of information with the MPC Meeting Minutes, Public Sector Net Borrowing, and the Spending Review – which will underscore the budget and what has taken place under the haze of austerity measures instituted in the late spring come to light.
The JPY continues to trade in the strongest parts of its range against the USD but it has done so in a fairly consolidated manner when compared to the volatility other currency pairs have recently seen. The AUD has lost a bit of ground in early trading this week and this has not coincidently happened as the price of Gold has come off of its highs. The combination of a slightly strong USD and a slightly weaker Gold price yesterday proved too much for the AUD. The question is obviously what the duration of these moves will be in what has become a very nervous global marketplace that has seen many leading central banking officials publically worry about currency manipulation and protectionism. Volatility is likely to continue to be a part of the trading landscape and for the traders with the stomach to challenge the market opportunities await.
Written by bforex.com