Risk taking came out of hiding on Tuesday as the EUR continued to bully upwards against the USD in face of the Greek debt situation. Across the Atlantic the U.S. equity market turned in positive performances as all the major indexes rose. And where did all of this good sentiment come from? Was it better than expected economic data? No. Actually Germany and the U.S. continued to underwhelm investors with a bad German ZEW Economic Sentiment reading and Existing Home Sales from the States proved lackluster. The Greek government managed to beat a no confidence vote late last night, but this wasn’t the reason for increased risk taking either. Today the FOMC Statement will come from the Federal Reserve and then Ben Bernanke will take the podium and answer questions about the American economic outlook. Investors will be watching for any signs from Bernanke on how the Fed is going to find a way to continue to stimulate the faltering U.S. economy. Thus the EUR’s move and that of the equity markets may prove to be a case of short term bottom feeding as investors look for financial instruments which they believe are undervalued. Will they prove correct? Time will tell.
Europe will release its broad Industrial New Orders today, but attention will remain on Greece which did jump one hurdle last night, but still has to pass new austerity measures in order to seemingly qualify for its new bailout package. While Crude Oil Inventories will be known later from the U.S. today, it is clearly the Fed that will be monitored closely. However the FOMC release is not until the afternoon in the States which means that investors may be apt to sit on the fence and wait for Mr. Bernanke and Company to make their viewpoints known. Tomorrow Flash Manufacturing and Services reports will come from Germany and France. The U.S. will release weekly Unemployment Claims and New Home Sales figures. The EUR/USD pair remains volatile and the Single Currency has not been devastated in any way by panic – which did not show up. Thus the EUR must continue to be traded for the time being with a keen eye on Greece for any surprises and the counterbalance it is getting from a weak USD policy via the Fed. Tonight’s press conference with Fed Chairman Ben Bernanke should provide impetus depending on how he answers questions regarding quantitative easing.
The GBP, AUD, and JPY all managed to trade in range on Tuesday against the USD. The U.K. released Public Net Sector Borrowing figures yesterday but it provided little impact. Today the MPC Meeting Minutes will come from the Bank of England per their last conference. Commodity markets like Forex besides the EUR/USD and Gold have provided traders with an opportunity to actually take advantage of ranges. Cautious trading has been strong in most physical resources. Crude Oil remains locked in a consolidated value. Grains have been rather steady also. Gold as of this morning is trading around 1543.00 USD, which underscores that there are still investors who are seeking the safe haven of the precious metal.
As much as risk was put back on the table yesterday within the equities there are still many questions which remain unanswered – and worse – even unasked. Greece seems to have moved passed one critical challenge but still faces many additional obstacles. The European economic outlook like the American prospects remains rather fragile as Consumers seem to be expressing a great deal of concern about stability.
While the EUR/USD has provided plenty of fireworks many of the Forex pairs have been rather steady and range trading is likely to continue into tonight’s FOMC Statement from the States. Traders will find opportunities in the broad markets. Patience and perseverance are needed.
Written by bforex.com
