The USD continued to gain against both the EUR and GBP on Monday in what amounted to a replay in many respects of recent trading sessions. A flight to quality by investors has been the overwhelming decision taken in recent weeks and the intensity of the move must be examined. The USD has been gaining in such a way that some may be tempted to question if this is more an emotional move than a fundamental one. On the other hand, the manner in which the greenback has gained against the EUR has been orderly meaning that its gains have not taken place in a panic mode in many respects. Having said that Wall Street and other equity markets globally continue to show stress and they have steadily declined. The U.S. did release Existing Home Sales yesterday and the number was an improvement over the forecast coming in with a result of 5.77m.
The S&P/CS Composite 20 HPI will be published today and is expecting to show an increase in the value of housing in the bigger U.S. metropolitan areas of 2.5% overall. Also the Richmond Manufacturing Index is on schedule. For investors who have the stamina to look at data – taking into account the degree in which sentiment has driven the broad markets the past few weeks – the next few days should be interesting. Tomorrow Core Durable Goods figures are due and on Thursday the Prelim GDP will come. However, a EUR centric mode is clearly still in effect and this continues to resonate and bring about caution. Traders should also remember that next Monday is a holiday in the States. This means that volume may be lower than normal this Friday as investors escape for a long weekend. More importantly it will cause some to question what positions they will want to hold with the possibility of more surprises being sprung when a majority of the market participants will not return until Tuesday. The USD has been strong and may continue its safe haven trend as long as the broad market noise remains negative.
There was no major economic data released on Monday from the E.U., but this didn’t stop the EUR from being the focus of investors worldwide. The Sovereign Debt crisis has now in essence become an issue which covers the overall health of the European continent and the possibility of international contagion. Spanish banks came under an increasing glare yesterday as the Spanish government announced that it was pushing certain struggling banks into a merger to solidify them. Industrial New Orders statistics will be brought forth today by the E.U. and a gain of 2.2% is the estimate. However, investors will continue to watch the pronouncements from various European governments which get into the ‘austerity act’. Italy continues to give details about its cost savings measures and rumors persists that France is considering a change to its national retirement and pension structures. The EUR has certainly declined in a rather swift manner the past few weeks, adding on to what was already a weaker trend versus the USD. Traders who swim the single currency’s waters will face challenging tides today.
The Sterling continues to languish against the USD. There were no major economic reports on Monday and the GBP essentially mirrored the declines of the EUR. Today the Revised GDP figures will be released from the U.K. and a gain of 0.3% is forecasted. Also the new coalition government will have their legislative agenda presented today. Thus, even though the GBP has certainly been in the shadow of a EUR centric storm, today’s data and news generated from the U.K. could be enough to create its own impetus. If the GDP provides a negative surprise this could spur on the cautious sentiment which already exists regarding the Sterling because of doubts that persists about the U.K.’s growth prospects. Traders may find more volatility today in the GBP.
As Asian bourses continued to reflect the unimpressive results in other international equity markets, the JPY was bolstered by risk adverse traders. The Yen now finds itself touching the strongest parts of its range versus the USD and as long as bourses continue to roil there stands the chance that the JPY will find takers. Gold climbed on Monday, but remains below the 1200.00 USD mark and its recent decline from its highs may get the attention of those willing to speculate.
Disclosure: No positions