In the past week the broad markets have continued to churn out fairly modulated results. The EUR continues to range trade near its highs since the last ECB monetary policy meeting in which little has actually changed and the European Union remains steadfast within recession. While French Industrial Production last Monday showed improvement this was likely a blip on the statistical map and at the same time the Italian Production numbers eroded further. In essence the European actors within the the Single Currency theatre have tried their best to be quiet, with only occasional misgivings being whispered by a few brave officials and the ‘always too late’ IMF.
From the U.K. the GBP has also been trading much stronger against the USD and remains near its highs. And to follow our theme Manufacturing Production figures last Tuesday showed the British economy still mired with lackluster performance. Meaning that the Federal Reserve continues to be the ‘market maker’ in the forex world, as they essentially continue to make the USD weaker in order to encourage the U.S. economy along with its quantitative easing program and a formidable ‘air pump’ for Wall Street for over priced equities in AdvantFinance’s view.
Most major equity bourses internationally are within range of their one month lows and although Asia has begun its trading as of this morning with gains, investors have certainly began to take a more cautious approach to stocks and sentiment appears nervous. The Nikkei remained a bastion of violent trading in the past week. Traders would be well advised to treat the main Japanese index with care and have the ability to handle its volatility. Japan remains seemingly locked into its pattern of near schizophrenic attempts to manage its economy with different factions continuing to publicly debate the best path for the nation, but after almost twenty full years of debate some investors might be used to the lack of progress in Japan by now. The JPY has gained in the past week and traders may be inclined to think that the Yen may be aiming for its stronger values still, the likes of which have not been seen for almost two and half months.
Gold as of this writing is near 1391.00 USD and has not shown the ability to jump upwards even as the Single Currency and the GBP have strengthened against the Greenback. Crude Oil has shown a speculative flair the past week and WTI is near highs, but its current value looks rather suspect and traders may find a reason to test these heights. Commodity prices in general continue to show a lack of strong demand. And this is partially why the value of the AUD continues to remain near the lower ebbs of its trading range too.
The Empire State Manufacturing Index reading will be released from the States later today and it is expected to show a slight improvement. Most interesting today may be the speech that the President of the Bundesbank, Jens Weidman, will present about the E.U. currency union in Bremen, which will reportedly discuss the challenges that the Single Currency faces during these tough economic circumstances – but will anyone be paying attention?
Tomorrow the German ZEW Economic Sentiment report will be published. However, the flash point for this week will be on Wednesday when the Federal Reserve brings forth its FOMC Statement. With economic data from the U.S. continuing to turn in mixed results investors will be keen to try to find some realistic guidance from the Fed regarding its outlook. But cynics may point out that the last thing that they would want to use as a forecasting mechanism is the Federal Reserve, which likely has reasons to remain overly ambitious and paint landscapes that do not show the significant storm clouds on the horizon.
- Robert Petrucci