Before leaving on an extended business trip, the term ‘oil shock’ was used in this daily analysis column. And nearly a week and a half later the words are resonating around the world. Major economic powers are dealing with very a complex mix of inflation caused by rising energy costs and growth prospects which remain lean. The U.S. has turned in slightly better than expected economic data as of late, but its growth prospects remain suspect. The Non Farm Employment Change data on Friday from the States showed that jobs are being added, and that the official Unemployment Rate is improving, but its results are being called into question because many potential employees have simply left the job market – in other words they have stopped looking for work. This week will be relatively light with economic data and the broad scope of trading is likely to fall on the seemingly expanding developments from North Africa and the Middle East.
The USD has been hammered by the EUR the past week and the GBP has also gained. Gold is at record highs, trading this morning around 1436.00 USD. The price of Crude Oil remains well over $100.00 USD a barrel. There is talk that the U.S. will tap its emergency strategic Oil reserves. And investors worldwide are looking at the Central Banks of the major economies as the potentially hazardous tandem of slow growth and inflation lurk. The possibility that Central Banks such as the ECB and others are taking into consideration higher interest rates is causing reverberations internationally.
Today the Europeans will release their Sentix Investor Confidence reading and the U.K. will publish BRC Retail Sales Monitor data and the RICS House Price Balance report. However, the crux of market sentiment will continue to be shaped by the way in which the political earthquake that is taking place in North Africa and the Middle East continues to play out.
Looking forward this week, the U.K. will have the Bank of England step into the fray on Thursday as they issue their interest rate policy mandate. And the U.S. will release Retail Sales numbers on Friday. But between then and now traders will have to gauge momentum in these markets very carefully as perilous winds pervade. Short term traders can see that ranges in many of the markets are witnessing the USD under enormous pressure versus many currencies including the JPY and the AUD. The long term is in question because of the prospects of rising Crude Oil prices and a significant impact on all economies. Central Banks and their members will be watched attentively as investors try to gather all information and act according to their interpretations. Inflation via high energy prices is coming at a particularly cruel time when many major economies are already under strain.
This week is likely to see a continuation of volatility based on the turmoil that is transpiring in North Africa and the Middle East. The reality of the situation is that if Crude Oil prices remain high that investors will remain nervous and the broad markets speculative.
Written by bforex.com
