Consolidated trading was self evident across the broad markets on Wednesday as caution has begun to have an effect on currencies and bourses alike. The USD traded in tight ranges versus the majors without little to be said, except values were slightly tested, but essentially left the Greenback on the stronger side of its recent weak trends. Gold and Crude Oil both maintained their rather high values on Wednesday also but their stances were less volatile as it appears investors are taking in the news and playing a waiting game. There was little in the way of economic data yesterday internationally, the U.S. released Crude Oil inventories but its jump in storage did not lessen energy prices. The German Industrial Production numbers met expectations head on.
Today the U.S. will release weekly Unemployment Claims and Trade Balance numbers. Tomorrow the States will publish Retail Sales and Consumer Sentiment data. Both sets of reports could prove to be noteworthy, but may not effect overall short term sentiment taking into account investors are largely focused on the political developments from North Africa and the Middle East still. However, traders should be aware that investor and financial institutions always keep an inkling of pure fundamental data in their arsenal and the effect on the psychology of the market can always spark a new dynamic if data creates enough of an impact. The U.S. like its major counterparts continues to show rather lackluster growth taking into account the amount of quantitative easing that has been needed to create rather lackluster grades.
While Europe will remain fairly quiet with data today, the U.K. will actually put forth some interesting news. The U.K. publishes its Manufacturing Production numbers and the Bank of England will issue their monetary policy pronouncement. The U.K. has achieved stagnant growth at best the past year and its ability to continue to expand its economy remains a struggle. Austerity measures and a higher VAT are taking their toll on the public as is inflation, which is chiefly coming from food and energy. The BoE is very unlikely to raise interest rates today. Members of the MPC are publically known to disagree about monetary policy and the debate will not be agreed upon today. Bets that have been made by investors for an interest rate hike this year will be put to the test. This because while inflation may in fact be a fear, it is questionable how much an interest rate by the BoE could slow down price escalation with food and energy costs – since they are driven by core commodity prices that are largely outside their realm of influence. The same story goes for the ECB and as much as talk has ramped up about the possibility of higher borrowing rates from Europe, the question must be asked if the long term impact of such a move would be a positive for most of the nations making up the E.U. besides Germany.
The JPY and AUD both found consolidated paces on Wednesday and appear to be waiting for signals from other sources before they move off of their current levels. Gold and Crude Oil remain critical barometers for international investors. Risk adverse trading has shown signs of momentum particularly from bourses. Asian equity prices have largely floundered like their international counterparts since last week.
Tomorrow appears to be setting itself up as a day in which the worm can turn in the investment world. The data from the U.S. is expected show weakening Consumer sentiment. While Retail Sales are expected to climb ever so slightly, polls show that Americans are not convinced in mass that better days are down the road. Combined with the possibility of developing news from the geo-political cauldron that has been brewing in North Africa and the Middle East and has found Fridays particularly important, risk events abound going into the last two trading days of this week. Traders must be aware that consolidation often leads to quick breaks and jumps in values among currencies and commodities.
Written by bforex.com
