A Week For Central Banks

The USD continued to decline in value against the EUR, GBP, and AUD on Friday. The Greenback continues to find itself on the weaker side of its ranges versus the above. The Forex market essentially has essentially put the USD to the test as risk appetite continues to increase among investors. The JPY however has continued to decline even against the USD. Gold has been steady and of this writing finds itself 1430.00 USD an ounce. Crude Oil has been inching higher. The international stories that have dominated the news front the past few weeks continued to find airwaves as Japan, Libya and the Middle East, and Sovereign Debt concerns from Europe stayed in focus.

The U.S. released better than expected jobless numbers on Friday via the Non Farm Employment Change data. A result of 216k was published compared to the anticipated outcome of 191k. However, the improved number has not completely translated itself into American economic data. The ISM Manufacturing PMI came in at 61.2, close to the expectation. Wall Street responded by closing out the week positively and keeping is momentum upwards. Many investors have started to talk about an outright U.S. recovery, but many questions are on the horizon from the housing sector, consumer sentiment, and even the real Unemployment Rate. Fed watchers who believe in the positive outlook may be tempted to believe that the Central Bank may start to become more hawkish regarding it monetary policy and that what has been known as QE2 – quantitative easing 2 – may be the last of monetary infusions.

The U.S. will not release any major data today, but tomorrow the ISM Non Manufacturing PMI statistics will be presented. Several FOMC members are slated to deliver speeches the next few days and the Fed’s FOMC Meeting Minutes will be published Tuesday. Like its counter parts the ECB and BoE, the Federal Reserve is finding itself under the microscope. The question that must be answered is if the U.S. recovery is sustainable. The USD has fallen in the past few months and it stands at an interesting juncture and may prompt some traders to begin searching for a possible reversal.

The EUR has done well under the guise of a potential interest rate hike from the ECB. The European Central Bank will be holding their monetary policy meeting this Thursday. It is widely expected that President Trichet will enter his press conference with a rate hike in place. If this occurs the debate that will ensue could get boisterous as investors argue about the battle that is playing out with inflation and growth. The E.U. continues to suffer from lackluster growth and the question is how an interest rate will affect countries such as Ireland, Portugal, Greece, and Spain as they battle Sovereign Debt issues. Europe will release its Sentix Investor Confidence reading today, and tomorrow the broad Retail Sales numbers will be brought forth. But it is the ECB which will have everyone’s focus this week and investors will have to decipher just how much the potential interest rate hike has been digested into the value of the EUR already.

Construction PMI data will come from the U.K. today and the GBP finds itself enjoying a strong value against the USD. The Sterling continues to battle within the higher realms of its range and it has done this not only under a EUR centric cloud, but as issues about growth, inflation, and austerity measures affect the U.K. landscape. The BoE will be holding their monetary policy meeting this Thursday, but no interest rate hike is anticipated. And if it comes to fruit that the ECB increases their rate and the BoE does not, it will be more than interesting to see how investors react to these divergent polices as both nomenclatures battle rising fuel and food costs in different ways.

Commodity prices continue to attract the attention of many traders. Gold has been consolidating near its record highs and Crude Oil has slowly and surely pushed its way upwards. Questions about the international economies continue to be heard and concerns have not been washed away. The major economies are not out of the woods yet and several tests await the biggest nations down the road.

Written by bforex.com