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Wait & See Game Playing Out

The USD gained on the EUR on Monday as trading sentiment in the currencies showed divergence, this because the GBP continued to perform relatively well against the greenback. Wall Street turned in another flat performance as investors continue to show a lack of direction as they seemingly wait on the all important jobless numbers this coming Friday. The U.S. has proven over the past couple of weeks that it’s so called recovery is facing a stern challenge like its international counterparts as data has proven more than lackluster in several instances. Housing, retail, and the GDP reports have provided little relief for cautious investors. Yesterday’s Personal Spending outcome proved flat. Today the CB Consumer Confidence reading is on the calendar and a result of 62.8 is anticipated. Also the S&P/CS Composite 20 HPI will be brought forth and a gain of 3.5% is forecasted.

If Wall Street is viewed as a barometer of risk, it has shown that investors continue to have questions about the long term outlooks for the U.S. economy. The jobless data which will start to be produced tomorrow with the ADP report and culminate on Friday with the government numbers will serve as a lynchpin for plenty of volatility. Traders should also keep in mind that next Monday the U.S. will be shuttered for Independence Day celebrations. Meaning that after the big Non Farm Employment Change results are presented that investors will have to ask themselves if they are willing to carry positions over a three day haul in what have become clearly tentative markets. The USD gained yesterday as EUR centric movement once again surfaced in a negative manner. Safe haven trading appears to be the dominant theme for many investors. Traders will have to be stay aware of news events from a variety of spheres and if involved in short term positions - they will have to be proactive.

With very flat data coming from Europe and news circulating that Spanish banks are voicing concerns about the ECB’S liquidity program, the EUR began to decline versus the USD. It only took one day effectively to turn the optimism that stability had been found in the EUR - into a slippery slope once again. The European Union’s M3 Money Supply data was unspectacular and the CPI figures from Germany proved gloomy. In essence investors are being weighed down by the negative prospects for any type of recovery from Europe, not only in the short term, but the long term as well. Concerns continue to be voiced about Greece and the hurdles it faces, and the European banking system as a whole, taking into account that debt issues are rampant. While Europe has certainly begun to talk about austerity, this doesn’t insure that a default cannot take place. There will be little data from the E.U. today and tomorrow German Unemployment numbers will be published. The crux of the matter for the EUR is clearly sentiment that is being affected by fear. The question is whether that fear is justified.

The GBP has had a nice run in value recently and yesterday it was able to trade in a divergent manner compared to the EUR against the USD. The U.K. will start releasing rather important data today and this will continue into tomorrow. Net Lending to Individuals and Final Mortgage Approvals will be published today. Tomorrow the Final GDP and the Nationwide HPI will be brought forth. Investors are not exactly expecting fantastic data, but what will be interesting to watch for are any affects caused from surprises if they arise. With most sentiment apparently having lined up on the rather negative side already regarding potential growth, the question will be how data could affect the Sterling. Since the GBP has had a good run the past couple of weeks what may serve as a better indication in actuality may turn out to be the FTSE. If investors begin to feel more cautious, we could see a test of the GBP range.

The JPY continued to build momentum against the USD on Monday. Japan released rather negative economic data early today also, which highlighted that its promising government pronouncements have now met head to head with a rougher economic reality. Safe haven investors have been a constant lynchpin for the JPY and the combination of cautious international investors and additionally poor economic data from Japan have seemingly increased risk adverse trading.

Disclosure: No Positions