USD
The USD lost ground to the EUR in early trading on Monday as the effects of the Basel III accord brought clarity into the markets – supposedly. The U.S. did not release much in the way of data yesterday leaving the broad markets without much direction as the day progressed. Sentiment remains fragile and investors may be gearing themselves towards today’s Retail Sales figures, which are supposed to nearly match last month’s outcome. Tomorrow the Empire State Manufacturing Index and Industrial Production numbers will be brought forth. Traders on Wall Street have thus far enjoyed a good September and the today’s Retail Sales figures could have an impact.
The crux of the matter for investors remains the economic prospects for the States. Warren Buffet was quoted yesterday as saying he believes that the U.S. economy is not about to suffer a double dip recession and that his portfolio of companies within Berskshire Hathaway are performing well and have good outlooks. The Basel III accord that was hammered out over the weekend may have given the markets some support as investors continue to seek any signs of financial stability. But as always, the proof will have to be in the pudding for the new banking regulations, and with plenty of time to comply there is little in the way of hardship being spoken about now. The big question down the road is what will be allowed to be counted as capital when accounting for reserve totals and that remains unanswered. The USD has found itself losing some ground to the EUR, the JPY, and commodity based currencies, but it may prove difficult to critique the short term marketplace. Retail Sales numbers will be watched closely today to in order to gauge the tenacity of the American consumer and what it means for the American economy.
EUR
The EUR managed to gain in the early sessions on Monday and held on to the stronger part of its range. There was little data from Europe yesterday, but today the German ZEW Economic Sentiment report will be released and while the ECB and many politicians have been talking up the health of Germany it will be interesting to see what the outcome is. Also Industrial Production numbers for Europe will be brought forth. Talk of a possible dip recession within Europe has been dismissed widely by officials, but as pointed out yesterday investors should look at numbers and pay less attention to public pronouncements. Tomorrow CPI data will come from Europe, but it is today’s ZEW report from Germany that will be coupled with a dollar centric sentiment that will either stir or kill risk appetite.
GBP
The Sterling continued to be under pressure on Monday as mixed data once again showed its ugly head. The RICS House Price Balance showed a significant drop to minus -32%, far below the estimate of minus -11%. However the Nationwide Consumer Confidence reading was slightly better than anticipated with a mark of 61 compared to the estimate of 59. Today the U.K. will release its CPI numbers and this will be of interest to investors because inflation has been stronger than projected even as growth has been weak. The GBP has found headwinds for the past month as investors have began to ponder the cruel dynamic of lackluster growth prospects coupled with severe austerity measures and higher taxes.
JPY & AUD
The JPY has found itself taken to the very height of its strength versus the USD as investors have continued to test the resolve of the Bank of Japan and officials. The Japanese ruling party held a vote earlier today and maintained its current leadership. The AUD continues to also trade near its highs, but for entirely different reasons as commodities, a stable economy, and political clarity have helped. However what traders of the AUD may ask soon, is where valuation constraints stand as obstacles?