The USD saw its ranges get tested by the EUR on Tuesday. As equity markets declined globally on fears that transpired because of the Japanese crisis, currencies began to move off of their consolidated ledges. The price of Gold also dropped yesterday, and many other commodity prices were put under pressure. A complex web of questions and developments continue to pervade. Investors globally are being confronted by a confusing myriad of information that is not clear. Nervousness despite reassurances from government sources in Japan continues to be rampant and traders should expect the remainder of this week to be volatile as sentiment is affected directly by sudden changes in news and rumors. The USD finished the day weaker against the EUR, and nearly unchanged versus the GBP. The JPY continued to trade slightly stronger in the wake of the crisis and this has caught the eye of many traders.
The Federal Reserve released its FOMC Statement last night saying that it believes the U.S. economy is firmer, but continues to have rather delicate and vulnerable problems to overcome. The Fed did pay attention to the raising price of Crude Oil, but brushed it off saying that other inflationary data long term remains under control. This report basically signals that the U.S. has no intention of raising its interest rates anytime soon, and that it will march ahead with its current quantitative easing policies. Today the States will issue Building Permits and Housing Starts data and the numbers are expected to be around last month’s outcomes. In their report last night, the FOMC Statement specifically said the housing market remains depressed. Tomorrow the weekly Unemployment Claims, the Philly Fed Manufacturing Index, and the Core CPI data will be released. The U.S. economy remains in a state of flux and one that appears to be showing signs of recovery, but continues to display large hurdles to jump. The USD is trading at the weaker side of its range against the EUR and it is not beyond the realm of possibility that the Federal Reserve feels quite comfortable with the relatively weaker Greenback at this time.
The EUR and GBP turned in interesting results on Tuesday as the Single Currency found itself in a rather swift test of its range against the Greenback. By the end of the day, the EUR had recovered from its short term weaker momentum and finished near relative highs. The Sterling found a day of range trading. Economic data was published, from Europe the German ZEW Economic Sentiment reading turned in a worse than expected result. Housing price numbers from the U.K. came in weaker than expected also. Today Unemployment data will come from the U.K. and Europe will see very little data. The crux of the situation for the EUR and GBP will remain in the context of risk appetite in an environment that may not be defined from what is taking place on the European continent short term. However, investors no doubt continue to keep the thought in mind that the Single Currency has many questions ahead about Sovereign Debt.
The AUD traded slightly weaker against the USD on Tuesday and this perhaps not so coincidently took place as Gold and other commodities lost value. Gold is trading around 1400.00 USD an ounce as of this writing, but appears to be moving in a rather swift movement that shows volatility shadowing it.
Some stability came into the equity markets in Asia today, particularly Japan, as the Nikkei slightly recovered from the previous two days results. But traders should be careful not to get caught up in a belief that all answers have been resolved, and investors and financial institutions remain uneasy. In other words traders should not be lulled into a false calm and should stay attuned to all developments which may include setbacks that could create vulnerable equity markets again.
Written by bforex.com
