The broad marketplace continued to display cautious sentiment on Monday. Global equity markets declined. Wall Street experienced steep losses on the major indexes as downward pressure continued to mount. The USD held steady against the EUR and GBP. Gold was resilient and Crude Oil remained in a tight range. Investors appear to be waiting for signals that the clouds that have emerged again over the European Union regarding the debt situation and a ‘suddenly’ less then bright outlook about the international economies will dissipate. Even as IMF officials publically say that Greece will absolutely not restructure its debt, most investors seem to be poising themselves for a worst case scenario.
The PMI Services and Manufacturing readings from Germany and France on Monday highlighted that sentiment has turned south. All of the marks missed the Flash expectations. Today the German Ifo Business Climate data will be released and investors are expecting a to see another rather disappointing outcome. The downward pressure that has affected the EUR remains a talking point and it will take several good doses of confidence to bring support to the Single Currency. The confidence game is largely being played by European officials who are trying their best to reassure investors that Greece’s Sovereign Debt saga will not end with a restructuring. However rumors continue to flourish that Greece is in desperate need of another bailout and faces the prospect of insolvency within two months time if they are not helped.
The U.S. will release New Home Sales today. The housing sector continues to deliver poor results and values on homes continues to underscore a depressed outlook. Last week’s Building Permits and Housing Starts figures were not positive. Tomorrow the States will bring forth Core Durable Goods Orders. Also a fly in the ointment have been the rather lackluster Manufacturing Index numbers from last week via the Empire State and Philly Fed reports. Though not as important to investors the Richmond Manufacturing Index data is on the schedule today. The USD has certainly gained as risk adverse trading has built up momentum. In the grand scheme of things when looking back the past year the EUR/USD pair actually finds itself with a nearly matching value comparatively. However, range trading has been self evident and there are distinct advantages for traders looking to gain from the daily trials that affect the marketplace. Equities have languished the past few weeks and this is a sure sign that investors may be starting to seek safer havens.
Commodities continue to turn in mixed results too, Gold has climbed and as of this writing is around 1517.00 USD per ounce. The fact that Crude Oil has not climbed in step with the precious metal and that other physical commodities such as grain have suddenly found hurdles indicates that some speculative tastes may have lessened for the time being. The price of Gold and its continued success also shows that a flight to quality may be underway with so many questions regarding debt issues. The AUD has traded slightly negative the past couple of sessions, but with Gold strong the Australian currency has not slumped dramatically.
The GBP remains under a EUR centric mode. But with so many questions for the EUR in abundance some investors are questioning when the Sterling will finally begin to show divergence with the Single Currency. The U.K. will release Public Sector Net Borrowing figures today. CBI Realized Sales will also be published. The U.K. does have debt and austerity issues and there is a complicated web of questions that affects the GBP and its relationship to the problems of the European debt situation and thus divergence has not yet emerged.
The JPY remains locked in the weaker side of its strong range. Many JPY bears abound waiting for the time when the JPY will begin to weaken against the USD. However the dance that the JPY has undertaken the past couple of years has been one that shows a well practiced range. Short term and long term positions for the JPY could be in opposite directions and prove effective both ways.
Written by bforex.com