Meeting Minutes Via Fed & BoE

A confidence game is in full effect as government officials including Central Bank leaders and CEO’s from various corporations speak about the ‘health’ of the global economy. The ECB is insistent that the Greek debt situation and the crisis that has been shadowing other European nations regarding Sovereign Bonds are under control. The CEO of Goldman Sachs made a pronouncement that the U.S. economy is strong and will essentially flourish and that the possibility of another recession is unlikely. Market sentiment however continues to show that it is tentative. Global bourses have turned in lackluster trading and equities have languished. Wall Street tuned in a mixed session on Tuesday as investors clearly remain sitting on the fence. Building Permits and Housing Starts data from the U.S. yesterday showed that the construction sector and housing sector remain fragile. Additionally, Industrial Production figures came in below expectations.

The USD lost ground to the EUR on Tuesday as the Greenback’s recent run of success came to a halt. The question going into today’s sessions is how range trading and sentiment will be translated. The U.S. will publish the FOMC Meeting Minutes from the Federal Reserve today. This will be interesting for investors who try to glance into the looking glass for future monetary policy. No matter the stance that government officials on both sides of the Atlantic are adhering to, there is evidence which suggests that the impact of inflation from the energy and food sectors is playing a negative role in consumer spending which obviously has an effect on overall production. Data from the U.S. and European sphere show that hurdles clearly exist. Thus investors are wondering who to believe and are proving cautious as they participate in the broad markets.

The EUR performed well on Tuesday along with the GBP. The German ZEW Economic Sentiment actually came in worse than expected. With a reading of 3.1 compared to the anticipated outcome of 4.8, German Institutional Investors showed that they have less confidence. Also the broad ZEW reading for Europe proved disappointing. Europe will be relatively light with data today and the remainder of the week, which should squarely put emphasis on the Sovereign Debt situation that continues to create headwinds for investors. The storyline surrounding Greece continues to focus on a new aid package and structural changes to the existing austerity plans the government already has in place. Germany is said to be leading the charge to make Greece change some of the austerity measures. And word continues to come from sources that talk of a restructuring of debt remains a very real option. One barometer that investors will continue to look at will be the yields on ten year government bonds from Greece and their effect on countries such as Spain. The EUR did find some footing yesterday and the question is how long it will be able to maintain this posture.

The Bank of England will release its MPC Meeting Minutes today. Much like the FOMC report from the Fed that will be published today, investors will carefully read through the publication to absorb its clues. CPI data from the U.K. proved higher than expected, but the BoE continues to issue statements that say while they will remain vigilant about inflation that they believe pricing pressures will diminish as the year proceeds. The GBP continues to move in a rather tight knit dance along with the EUR against the USD. The difference is that the BoE does have a different policy in many respects compared to the ECB. The U.K. will also issue employment data today. Tomorrow Retail Sales numbers will be brought forth.

The AUD picked up ground on Tuesday as commodity prices showed some stability and the Australian currency showed that it has an ability to push back and range trade within the higher depths of its value. The AUD has had a sustained trend for some time and yesterday’s trading showed that the AUD is not going to easily give up its loftier perch as it continues to offer investors a solid interest rate and the prospects of a strong economy. The JPY traded in a consolidated mode. The Bank of Japan issued a warning saying that the Japanese economy will continue to face enormous challenges as it deals with the prospect of rebuilding after the tragedy that hit the country. Export companies remain unsure of mid term prospects because supply chains are still facing difficulty. The JPY has been in a tight range since the crisis began and looks like it will remain range bound for the foreseeable short term.

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