Knowledge is Power!
By forex market
The USD has been able to hold onto its gains made late last week as it has kept the EUR under pressure and shown the ability to have some staying power against the GBP and JPY. Broad market conditions remain nervous as evidenced by global bourses, particularly Wall Street and the manner in which the S&P Index has traded for nearly a week. Yesterday broad Retail Sales data beat its estimate, but the Core Retail Sales only held serve coming in with its expected result of 0.4%. Unfortunately the Empire State Manufacturing Index also turned in a brutal disappointment with a minus -11.1 reading compared to the anticipated mark of plus 13.9. Today PPI data will be brought forth from the U.S. and its expected broad figure is 0.7%. The results from these statistics today could prove interesting taking into context the recent gains in commodity prices until the last few trading sessions.
Industrial Production numbers will also be brought forth today from the States. Tomorrow Building Permits and Housing Starts numbers will be published. While the 1 USD has certainly not escaped the shadow cast by the much debated Federal Reserve’s quantitative easing policies and a poor outlook for strong growth, the greenback has flourished in the past week due to doubts starting to rise again about the Sovereign Debt of Europe being called into question. Also it cannot be underestimated that there is a possibility that investors and financial institutions simply thought the USD had been oversold the past few months. However a short term trend is not a long term avenue and many roads still have to be traversed for the USD to prove it has staying power against the major currencies. The Fed seems to want a weak USD policy even though they say the opposite, but there can be no denying that quantitative easing is in fact a way of weakening the currency. Having said that and making matter complicated is the mindset that some safe haven trading may be coming into vogue with poor global economic prospects and nervous bourses.
The EUR has continued to face a reemerging gauntlet of negative sentiment based on debt issues faced by member nations within the European Union. Ireland continues to have fingers pointed at it regarding it banks and debt. The IMF is on the record as saying it does not think Ireland will need help however, Ireland itself has not ruled out a scenario in which it will need to ask for financial consideration. There was very little data from Europe on Monday, but today the ZEW Economic Sentiment report is due and broad European CPI figures will be brought forth too. Investors are certain to continue to focus their attention on the weak links in the overall scheme of European economics – namely Ireland, Greece, Spain, and Portugal. Growth prospects are not certain for the continent and legitimate concerns are being expressed about fiscal policy on a whole by the ECB and E.U. members. The EUR has found a tough path the past week and it may continue to find itself under pressure if risk sentiment stays weary. The question for the EUR – end of the day – may be who do you believe? Governments and their officials say no imminent debt failure is in store while investors are apparently skeptical.
The Sterling has not done poorly the past week taking into consideration the fall that its nearby counterpart, the EUR, has suffered against the USD. While the GBP has lost some value it has maintained some stability too. CPI data will come from the U.K. today and like all nations it is experiencing inflation with certain important core groups such as food and fuel. The question is if inflation is much of a danger from other areas, having said that rising food prices certainly can affect the attitude of consumers and cause them to restrain spending on other goods. The U.K. continues to turn in rather mixed economic data and it has shown little signs of achieving strong growth. This is no different than many other major economies, so the question is if the U.K. government austerity policy that has been instituted can continue to find stability if growth remains hard to grasp. The Sterling is in an interesting consolidated range.
JPY & AUD
Both the JPY and AUD have proven ripe for picking the past few sessions. With the renewed strength of the USD sweeping through and the price of commodities finding some downside pressure both the JPY and AUD have lost value. The JPY finds itself on the weaker side of its range against the greenback suddenly and the question is how long can this trend continue. The JPY has shown a steady ability to bounce back against the USD, but a weakened JPY will not be a ‘sore point’ for the Japanese government which knows it will help their export companies. The AUD has come off of its highs and now is finding itself under the duel shadow of gold which has found that speculation can work both ways (as the precious metal has softened in value) and a stronger greenback. Opportunities are ripe for traders in both of these currencies who have the stomach to participate in these currencies.