The JPY lost more ground to the USD in trading on Tuesday. The EUR and GBP also were weaker against the Greenback within the FX market. The USD performed well as risk adverse trading became the prevailing sentiment for the day. The States turned in a disappointing CB Consumer Confidence number and a very poor HPI from S&P/CS. The results from the CB Consumer Confidence reading surprised some investors, but the question has to be asked why in light of energy prices which are starting to effect driving habits and hitting Americans wallets. Housing prices continued to decrease in the States fueling what is clearly a depressed market. And the question that is being asked, is not when prices will start to rise in the housing sector, but when will they find stability. Today the ADP Non Farm Employment Change numbers are on the calendar, as the jobless parade data for this week gets set to start and will culminate with the government’s reports on Friday.
Europe was walloped with another ugly dose of bad financial news when S&P downgraded Portugal’s and Greece’s debt yet again. Portugal is edging towards an abyss regarding its debt situation and though they have adamantly claimed that they will not need a bailout it should be remembered that Greece and Ireland claimed the same thing before reaching out their hands. Irish banking also was in the news for all the wrong reasons as whispers have emerged that results from a stress test are going to mean that the Irish government will have to take more control of its banking system as private institutions are shown to be incapable of surviving by themselves. The IMF –International Monetary Fund – got into the act yesterday when it stated that downgrades of the Portugal and Greece debt were not helpful. This because it means debt that is held by banking institutions looses value, which puts the banks in jeopardy also. Thus a vicious circle is starting to bear poison fruit. What it means is that international governing boards are criticizing ratings agencies for being too honest about the situation that nations face regarding Sovereign Debt, because it will not only erode the worth of financial institutions but also hurt what has become ‘confidence game’ in Europe. The EUR having said the above, did decline in value against the USD in only a minor way. The Single Currency remains in the higher reaches of its range compared to the Greenback. The ECB has helped the EUR with talk about an interest rate hike. Yet the EUR does have some dark shadows lurking and the Forex markets are monitoring the currency closely.
The U.K. published Final GDP results on Tuesday and they produced an outcome of minus -0.5% which was nothing to cheer about. The Sterling did decline in trading yesterday. The CBI Realized Sales reading will be published today, but it is likely that the GBP will continue to trade under a EUR centric motif as questions become murkier regarding inflation, growth, austerity measures, and debt ratios. The Sterling has done well the past couple of months like the EUR and its stands at an interesting juncture. The question is if the GBP will continue to show strength and stay near the higher bounds of its range or if it will start to give back some of the gains it has posted. The Bank of England has not been as adamant about the need to raise its interest rate compared to the ECB because of inflation.
The JPY as noted already did register a decline against the USD and finds itself at the weaker part of its strong range. The moves against the JPY the last two days have NOT come with any announcements of intervention by the BoJ. The JPY appears for the time being to be trading weaker as questions emerge about the long term impact from the tragedy that has touched Japan. The JPY remains an interesting opportunity for traders with a long term approach. The AUD has continued to get stronger and it has done this even as Gold has come off of its highs. The AUD has broken through to new highs and its momentum has found new backers. Crude Oil traded slightly higher on Tuesday. Crude Oil Inventories reports will come from the U.S. today, but it is news from Libya and the Middle East which continue to help spur on sentiment in the commodity. Grain traders should be aware that the U.S. will announce a major agricultural crops report on Thursday and this has put the grain markets into a very cautious mode before the government’s publication.
Written by bforex.com
