The Second Quarter Begins

There will be little room for any April Fools jokes going into the trading day taking into context the state of the broad markets and the amount of concerns that shadow. The equity markets led by Wall Street turned in an extremely good first quarter result and as we start the second business quarter today investors will be wondering if those positive gains can be sustained. It has been a challenging three months from the perspective of international risk events. The USD has found itself trading weaker against the EUR and GBP the past few months within the Forex markets, even in the face of concerns that continue from the E.U. regarding Sovereign Debt. Gold and Crude Oil have turned in stellar gains as commodity trading continued to remain under the realm of a dynamic mix of sentiment.

Going into Friday, the USD did manage to gains slightly against the EUR and GBP as the day came to an end on Thursday. First and foremost on investor minds today will be the jobless data from the States that is on the calendar, which will be led by the Non Farm Employment Change numbers. Weekly Unemployment Claims results yesterday remained less than inspiring and Factory Orders declined to minus -0.1% compared to the estimated gain of 0.7%. The economic data from the U.S. remains a curious debate, optimists are pointing towards ‘improving’ stability and prospects for growth, this while others point to a jobless situation that remains problematic and a housing sector that is still stumbling. The USD finds itself within the weaker realms of its value against the EUR and GBP. It may be that the Greenback will continue to find doubters as long as the Fed continues to lean on the side of quantitative easing. Investors will be on alert for a better jobless number today from the States, which could prompt a stronger USD, this if investors believe that the economic landscape is improving and it will start to limit further Fed interventions.

The EUR and GBP both traded slightly softer against the USD on Thursday. However, the EUR has accomplished a great deal the past few months in the wake of financial developments that do not cast the European Union in the best of lights. The EUR has maintained its value even as Portugal, Greece, and Ireland continue to face a storm of unpleasant questions. Part of the reason the EUR has done better is because of the stance the ECB has taken regarding inflation and its expressed intention to raise its interest rate sooner rather than later. Perhaps backing up that argument was the European CPI Flash Estimate yesterday that turned in a result of 2.6% compared to the estimate of 2.4%. The argument against an interest rate and the problems that it could cause were however apparent also, this as German Retail Sales turned in a negative –0.3% outcome, while missing an anticipated gain of 0.4%. The European bond markets point to a divergent European financial strata, this as German bond yields remain extremely stable, but those of Portugal and Spain suffer. Final Manufacturing PMI will come from Europe today and the U.K. will produce a Manufacturing PMI report also. The EUR and GBP produced solid gains in the first quarter, moving forward the EUR faces a rather cloudy forecast and the GBP is likely to remain in a EUR centric mode.

The JPY lost ground to USD on Thursday giving back its gains made the previous day. The swift move back to the weaker side of its range against the USD will garner attention from investors as some continue to believe that the JPY needs to weaken in order to help Japan through its fiscal maze. The AUD continues to trade in record territory and going into the weekend its backers will watch barometers such as Gold.

The broad markets have provided traders with positive gains within equities and the Gold and Crude Oil markets the past few months. Moving forward investors will look to long term prospects and weigh them against risks which have not gone away.

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