The broad markets remained rather cautious on Thursday as the USD continued to hold ground against the EUR and GBP. After months of taking it on the chin from the Single Currency the Greenback appears to be showing signs of life. The last week of trading under yet another storm caused by concerns about the European debt situation has created better value for the USD. Retail Sales from the U.S. met expectations head on with an outcome of 0.5% and the weekly Unemployment Claims missed their estimate slightly with a result of 434k. Wall Street turned in a rather tentative day of trading as the major indexes only gained minimally. Investors appear to be sitting on the fence and risk aversion appears to be growing.
The U.S. will release CPI data today and the inflation numbers will be of an interest to investors who have heard repeatedly from the Federal Reserve that prices will stabilize come the end of this year. Commodity prices on a whole, found some footing on Thursday after declining previously. Gold climbed back over 1500.00 and as of this writing is around 1503.00 USD per ounce. Crude Oil did not stumble further yesterday and going into the final trading session before the weekend is sure to get plenty of attention. Preliminary Consumer Sentiment marks will come from the University of Michigan today and the estimated reading is 70.0. Considering the climbing price of gasoline in the United States today’s CPI and Consumer Sentiment reports will be noteworthy. However, they may prove to be less significant than the existing psychology of the market which seems to be focused on the international debt saga that is raising eyebrows globally. The USD has done well this week and has essentially shown an ability to hold onto its gains.
The EUR has traded under the haze of the Sovereign Debt crisis which continues to generate news from Greece. Many E.U. ministers have put their two cents worth of opinions into the mix regarding the drama and by and large most politicians continue to mouth the line ‘there will be no Greek restructuring’. However when investors take a look at the yields now being forced upon the Greek bond market it becomes evident that those putting their money forth for borrowing by the Greek government are not so confident. Rumors continue to swirl and many analysts continue to predict that Greece will not be able to get out of their current economic dilemma without eventually restructuring. If history is any gauge it is clear that Greece has not exactly been able to fulfill their own stated visions for their monetary policy the past year. Already Greece is lining up for another aid package and the mighty question is what would happen if this latest emergency installment proves to be not enough to stop the flood waters. The E.U. will publish a host of GDP numbers from Germany, France, and other nations today. The potential problem of weak growth and austerity measures continues to be a perplexing mix for some European nations and it is not a situation that is likely to be solved anytime soon. The EUR has been put to the test this week. Short term there is always the potential for a rebound, but the fiscal crisis in Europe is very serious.
The GBP lost ground on Thursday as the shine created by the BoE on Wednesday seemed to have worn off quickly. The Sterling once again found itself trading in a rather EUR centric mode. Manufacturing Production numbers from the U.K. were disappointing with a result of 0.2%. Industrial Production numbers were even worse. The problem for the U.K. like that of some E.U. nations continues to be the plight of challenging growth prospects mixed with tough austerity measures. There will be no major economic data from the U.K. today and the Sterling is likely to go into the weekend with its EUR centric fashion intact.
The JPY moved promptly back to the stronger parts of its trend on Thursday. The JPY range has been consolidated for some time. On Wednesday the JPY did lose some ground, but the well known dance for the Yen proved all too predictable yesterday. The AUD found some stability on Thursday with firming commodity prices. The AUD must be watched carefully because of the volatility that continues to spark in the physical resource markets. The combination an attractive interest rate and a stable economy have made the AUD a stellar performer this year.
Written by bforex.com