Tuesday started off relatively peaceful as full volume came into the markets. The EUR did trade a little weaker against the USD. Economic data coming from Europe and the U.S. proved disappointing, but not surprising considering the previous reports that have been lackluster from both spheres. However as the day was drawing to a close Portugal had its Sovereign Bond obligations downgraded to junk status by Moody’s rating services. This put the focus squarely back on the debt crisis which continues to roil through Europe. The paper issued by the ratings services basically outlined their belief that Portugal will need to apply for another bailout package, much like Greece did during the past month. The EUR stayed stable under this storm, but the Single Currency finished the day on a weaker footing. Going into today’s trading investors must be asking themselves what is going to happen next.
Gold climbed on risk adverse trading and as of this writing is around 1515.00 USD per ounce. Crude Oil interestingly found some upwards momentum and is at the top of its range as it enters today’s market sessions. Commodity prices were able to show a speculative flair on Tuesday, but where exactly the impetus is coming from must be questioned. The AUD regained its pace also and is near its highs.
Germany will release Factory Orders statistics today, the U.K. will see the Halifax HPI supposedly, and the U.S. will have the ISM Non-Manufacturing PMI reading published. This will essentially set the tone for what will become a tidal wave of information that investors will have to deal with tomorrow and Friday. The ECB, the BoE will make news Thursday, and jobless parade data begin in earnest from the States. The ECB is widely expected to raise their interest rate. The perplexing question that many investors are asking is why the European Central Bank is planning on such an undertaking. While the European debt crisis continues to mount the ECB is sticking to their prime job of fighting inflation – it claims. However skeptics have reasoned that the ECB is raising rates as a way of combating weak sentiment surrounding the EUR.
The Forex and Commodity markets responded on Tuesday with a relatively tame day of trading. Wall Street proved cautious as it turned in mixed results. Risk appetite will be put to the test over these next few days with an overhang existing regarding the debt of nations, including the United States, and the global economic outlook. While many officials in the U.S. still talk about a stable economy, plenty of data has suggested otherwise the past two months. This week’s Non Farm Employment Change numbers will prove significant for investor sentiment. Job creation appears to be a problem for the States and the American public is not accustomed to such a high unemployment rate.
The USD has proven to have many doubters because of the Federal Reserve policy since the beginning of the year and the Greenback has actually lost ground to the EUR even as the Sovereign Debt crisis from Europe has mounted taken into context the full six months which have just passed. The fact that summer trading is getting underway may prove interesting over the next two months as volume begins to become slightly thinner due to holidays, but with so many tangible problems facing the major economic spheres traders will find plenty of opportunity to take advantage of nervous sentiment which will certainly bring about a continuous test of ranges.
The GBP proved relatively stable in the wake of the European news on Tuesday and the Sterling must be watched for any signs of divergence. The GBP has kept on the weaker sides of its range against the USD, but it has proven to have a rather consolidated value lately. The U.K. economy faces many challenges and its outlook is not exactly calling for growth. The Bank of England is expected to hold onto their rather dovish policy tomorrow.
The JPY crept back stronger against the USD yesterday. The JPY continues to be a candidate to perform a rather well know song and dance routine against the Greenback, this as its range trades in a tight pattern.
Written by bforex.com