The USD lost further ground to the major currencies in the forex markets on Monday. Weakness carried through from late last week’s trading for the USD versus the EUR and GBP. Global equity markets moved positively yesterday also, but it must be noted that volumes compared to last year remain quite low which may signal that not everyone is buying into the belief that ‘risk appetite’ dominates. The U.S. released Existing Home Sales figures and they missed the estimate by a wide margin coming in with a 4.88m outcome compared to the estimate of 5.15m. The States will be quiet with data today, but tomorrow New Home Sales statistics will be brought forth to a nervous pool of investors. The facts are clear that the housing sector in the U.S. remains a painful thorn in the side of the U.S. economy and one that is not going to disappear anytime soon.
The USD has moved to the lower parts of its value against the EUR, GBP, JPY, and the AUD in a rather profound manner. The reasons behind this are due to a complicated mix of international developments, which include Central Bank interventions supposedly. However, even as the G7 and Central Bank governors announced that they would intercede on behalf of Japan to help maintain stability, the FX market shows that it has many unanswered questions. Namely because the JPY remains in a rather strong stance, this even with the pronouncements from the Japanese government that they would not let their currency be preyed upon by ‘speculators’. Gold kept its pace on Monday along with Crude Oil with news continuing to develop from Libya and the Middle East, besides Japan – the prices of the precious metal and the energy commodities attract attention.
The EUR has become significantly stronger in the past few trading sessions, but few are lining up behind the EUR because they believe its financials have improved dramatically. Europe continues to work under an umbrella of difficult questions including poor growth prospects, soaring debt, and austerity measures which will be tough to accomplish. There will be little economic data from Europe today and tomorrow only the European Industrial New Orders numbers will be presented. Thursday and Friday will offer important statistics from Europe, but the notion that the EUR is not trading on fundamental bearings remains a strong sentiment.
The GBP like its counterpart from the continent remains bullish against the USD. CPI data will come from the U.K. today along with Public Sector Net Borrowing marks. Tomorrow the MPC Meeting Minutes will be released to a group of fascinated investors who will watch on with amusement as the Bank of England continues to suffer from an internal debate regarding monetary policy. The U.K. continues to see rising inflation for food and energy costs, but this is combined with a growth rate that is struggling at best. Like the EUR the Sterling is gaining in value as financial institutions struggle to find a clear economic picture. The GBP is at the higher end of its range and some traders may be asking how much leg the Sterling has left in its run.
The JPY has taken on a consolidated air the past two trading sessions. After initially losing swift ground to the USD on Friday’s intervention, the JPY has stubbornly climbed in value again. Japan remains under a crisis scenario and news is still developing. The latest reports indicate problems with food contamination in some parts of the country. While Japan is certain to rebuild at a quick pace, the questions that are being asked pertain to long term impact on its export market and its ability to pay for construction of reworked infrastructure while facing mounting debt ratios. The JPY is getting plenty of global attention and it may prove to be an interesting long term play.
Written by bforex.com
