Fast Markets Turn Cautious

Thursday was a much more tranquil day of trading compared to Wednesday as the broad markets seemingly took a breather. The USD languished near lows against the EUR and GBP, but did manage to find some footing. However a weaker than expected GDP number from the U.S. yesterday again highlighted that the American economy has many hurdles ahead. The AUD maintained its pace on Thursday, but it did decline off of its highs, yet still finds itself lingering near highs. Gold as of this writing is around 1533.00 USD an ounce, which is record territory. Crude Oil has been stubborn and has not backed down from its steady values. While the GDP report from the States would have usually been a highlight, it took a backseat to the residue from the FOMC Statement on Wednesday.

This last day of trading this week will see data including the European Unemployment Rate, German Retail Sales, and inflation figures via the European CPI Flash Estimate. The U.K. financial markets are shuttered today because of the royal wedding. The U.S. will release the Chicago PMI and will see the University of Michigan’s Revised Consumer Sentiment reading. As if on cue yesterday, the Advanced GDP report from the U.S. showed that its economy is growing ‘moderate’ at best. The gain of 1.8% was below the anticipated result of 1.9%. And the questions may now become a little louder from skeptics who suggest that the States along with its major counterparts in Europe face the specter of sliding into recession again. The high price of Crude Oil will do these spheres no favors. On top of the GDP number the weekly Unemployment Claims was released and proved disappointing with an outcome of 429k compared to the expectation of 392k. One better note came from Pending Home Sales, but its numbers can be viewed as suspicious taking into consideration the depressed housing sector.

The EUR while maintaining its values still has concerns of its own. The European debt situation has not been taken care of by any means and suspicions remain strong that Greece and others will continue to face a difficult path to manage their financial problems. There were no major economic releases from Europe on Thursday and while the German Retail Sales figures may be of interest, the Single Currency is likely to trade under a Dollar centric mode going into the weekend.

The GBP has climbed in value and finds itself within the strongest parts of its range. The U.K. will be on holiday today and this will decrease the amount of trading in the Sterling and create thinner volume during the European session. Traders should also take into account that the U.K. will be closed like many other European markets this coming Monday for Labor Day. Meaning that today could produce more volatility if the markets see thin trading.

The JPY has been consolidated. The JPY did gain a bit against the USD in trading yesterday, but it value is within a tight range. The AUD continues to show significant power as the combination of a good interest rate via carry trades (interest rate driven) and strong commodity prices propel the Australian currency upwards.

Given the fact that the broad markets have had plenty of volatility this week any swift movements should not come unexpected. However yesterday’s trading results show that investors may be tempted to be cautious going into this weekend knowing that many Asian and European markets will be closed this coming Monday. The Americans will be trading at full volume today and on Monday and this is where volatility could develop. Wall Street delivered gains again on Thursday even with less than inspiring GDP and employment figures. The USD is a topic of discussion for many and in the short term it may continue to be tested.

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