USD – Risk Appetite & Long Term Concerns

The USD lost some ground to the GBP and a bit of footing against the EUR on Thursday. These results came as risk appetite made an appearance on Wall Street as the major indexes all rose. However, the weekly Unemployment Claims in the U.S. once again turned in a disappointing result and today the Retail Sales data and Prelim Consumer Sentiment reading are on the schedule. On the heels of rather weak U.S. statistics continuing yesterday, savvy investors may be tempted to claim yesterday’s jump on Wall Street was a one day bounce. The USD remains on the stronger sides of its range and although the last two days have provided negative movement against the EUR and GBP it may not be time to write off the Greenback’s trend quite yet.

Trading can be examined in various ways and among them is short term and long term prospects. While the U.S. has shown signs of being able to have a recovery a couple of resounding questions have sprung forward. One is whether the States will be able to avoid any fallout from the European Sovereign Debt crisis. The second question and one that will get another chance of being answered today, is how the American consumer will help propel the economy? Thus while the markets may have enjoyed an equity rally yesterday and the USD found itself battling for ground, long term there are serious concerns about the state of international economies that will continue to spur on some form of safe haven trading. Therefore it is probable that we have not seen the end of the USD trend if investors feel that that they must seek a flight to quality. The Retail Sales numbers are expecting marginal gains today and the dominating concern is that unless the U.S. jobless picture can improve significantly that spending will remain tight. The USD will be under the whims of risk appetite today and traders will have to be prepared.

Written by