Wall Street was brutalized on Friday before going into the weekend. Risk adverse trading finished the day with investors essentially looking for protection. The USD gained versus the EUR and GBP and finished in the middle of its range, which essentially sets up the coming days as another test for traders. The EUR struggled per the indications that the ECB may be softening its stance towards a set of interest rate hikes. ECB President Trichet made it clear that July is likely to be the last of its rate hikes in order to maintain its bulwark against creeping inflation. Also the fact the Fed has not signaled that it is about to implement further quantitative easing has set the table for a delicate balancing act between two economic spheres which are beleaguered in many respects. The Commodity and Forex markets both saw swift and volatile trading on Friday and investors are likely to be nervous going into the next few days of trading.
The major equity markets of the U.S. finished with their sixth consecutive negative week. Gold has run into a rather interesting consolidated range. The precious metal is at 1530.00 USD as of this morning. Crude Oil appears softer on conflicting news about production disagreements within OPEC. The AUD finished last week on a downward slope too.
Most of Europe will have banking holidays today meaning the Forex market may be a bit lighter than normal until the U.S. opens. Australia was essentially shuttered also today. There will be no major economic releases from the U.S. today. Thus investors will awake today with the residual taste of risk adverse sentiment still in their mouths. The U.S will release Retail Sales data tomorrow. On Wednesday the Empire State Manufacturing Index report will be brought forth. Thursday the weekly Unemployment Claims will come and on Friday a Consumer Sentiment reading will be presented. U.S. data has been weak for nearly two months and the debate that has started to be won by skeptics suggests that the U.S. economic outlook is not as rosy as the government had suggested.
In Europe the financial picture also remains muddled. The debt crisis has not gone away. As of this morning no clear framework has been produced for the Greek debt situation. European ministers have confirmed that Greece will get another bailout package, but the exact nature of the Greek austerity measures and its accounting have not been brought forth. Bond yields via Sovereign Debt obligations from Portugal, Spain, Italy, and others remain firmly under the microscope. The EUR suffered sharp losses in late trading on Friday and part of its decline could be interpreted as a sign that investors may not have been willing to hold the Single Currency for a long holiday weekend. This will be a rather light week of data from Europe and the EUR is likely to face its tests directly based on risk sentiment.
The GBP was taken lower going into the weekend. This may have been a direct result from overhang related to its EUR centric position. But the Sterling is not getting much help from poor U.K. economic numbers either. Inflation data will be published tomorrow. Thursday will prove interesting with Retail Sales figures. The GBP like its counterparts has found itself with a brisk range and this week should produce opportunities for participants willing to stomach possible volatility.
The JPY has found it difficult to generate much excitement. It has been in a consolidated mode for some time. The Japanese economy faces many challenges. Short term the JPY appears set to linger within the stronger parts of its range, long term the JPY ‘should’ lose value in order to help Japan’s suffering export companies.
Written by bforex.com
