Critical Issues Shadow Markets

By mercaforex

The markets produced a rather cautious day of trading on Wednesday. The USD held its ground versus the major currencies except for the JPY in which it lost some ground. The greenback continues to foster obvious support from EUR centric movement that persists. Wall Street turned in a negative day of trading and the Dow Jones has proven that the 11,000 mark remains a tough hurdle to jump. There was a lack of economic data yesterday except for Crude Oil Inventories which showed an increase and put some pressure on the commodity. Today the weekly Unemployment Claims will be released and an improvement to 434K is anticipated. Last week’s number of 439k was better than forecasted and it will be of interest to investors to see if the jobless data can sustain a positive trend. The employment problem in the U.S. remains a critical issue.

Tomorrow from the States the only data of significance will be Wholesale Inventories. This has been a quiet week of data and trading has largely proven cautious. Even though Wall Street has turned in a long term positive trend many analysts continue to describe its gains as a ‘grind’. The Non Farm Employment Change numbers from last week have failed to stimulate the imaginations of investors and it is becoming self evident that other impetus is being waited on. The USD has done well against the EUR and GBP since December and its trend must be considered. Many questions linger about the durability of the U.S. economy and doubts continue to be expressed by many who point to the fragile jobless and housing sectors as causes for concern. The USD simply may be the ‘best’ contestant among a field of poor applicants today.

forex trading

EUR
The EUR has continued to face pressure as the Greek situation does little to abate. The EUR has had a negative week against the USD and yesterday’s Final GDP outcome from the continent did nothing to stem the tide. The unchanged number from the European GDP was below the expected outcome of 0.1%. Although the statistic was not far off the estimate, it does highlight that the E.U. is still very much within the grasp of a challenging economic environment and one that will not improve suddenly. To make matters more interesting the ECB will hold its monetary policy meeting today and there can be no doubt that the Q&A session with President Trichet will focus on Greece. A report circulated last night that the German Bundesbank has expressed their lack of agreement with the current Greek aid package as it stands. The EUR has been nothing short of vulnerable as questions about Sovereign debt have roiled the marketplace and it will be upon Jean-Claude Trichet’s shoulders today to calm the storm.

GBP
The Sterling lost ground against the USD on Wednesday as a negative Services PMI reading caused grimaces among GBP investors. The outcome of 56.5 was below the forecast of 58.1 and well below last month’s 58.4 mark. The BoE will release the results of the MPC meeting that will finish today and no major changes are expected regarding monetary policy. Also on the calendar today are the Manufacturing Production numbers and the Halifax HPI. Both of these numbers could garner considerable interest with any surprises. The national election is now high on the list of interest for investors too. The GBP faces a gauntlet of tough questions regarding its economy and the manner in which it is going to manage its debt. The Sterling has been able to resist streaking lower against the USD but it does find itself under pressure and at an important juncture.

JPY
The JPY gained against the USD as risk adverse trading took precedent and international bourses struggled. The JPY proved again that it still has the capability to fight its way back from the weaker points of its range versus the greenback. Risk sentiment continues to be the avenue that drives this currency pair. Gold marched higher yesterday and it did this even as the USD performed well against many of the major currencies. The precious metal must be watched very carefully. The million dollar question is where Gold’s demand is coming from?

Critical Issues Shadow Markets