The USD found itself back under pressure on Monday on a day of little economic data. As U.S. equity markets surged forward the USD found itself on the back of its heels. Part of the reason the equity markets surged was on the strength from investors taking the plunge into the financial sectors shares. This happened as news developed that several of the major banks plan on returning money received from TARP to the government ahead of schedule. Even though questions remain about the fundamental health of the banks involved it will surely remove the �Scarlet Letter� that has hindered their market value and improve their diminished stature. Morgan Stanley, JP Morgan, and Goldman Sachs are among the banks said to be lining up to payback the government funds. Today the U.S. will release it Building Permits and Housing Starts data. Having seen improved statistics from the housing sector the past month, investors will watch the outcome of these results closely. The Building Permits numbers are expected to produce a result of 0.53 million.
Treasury Secretary Geithner also got into the act yesterday when he issued a statement saying that the U.S. economy has stabilized. While this certainly is what government officials like Geithner should be doing in order to keep the marketplace optimistic, questions can be raised about such statements too. The contraction within the U.S. economy is still taking place, so it must be asked exactly what is meant by the word - stability? Are there real signs of economic growth or is the economy merely not getting worse as fast as it was before? Today�s housing sector information could provide another lynchpin in the debate about perception and will be the last major economic data until Thursday�s weekly Unemployment Claims numbers. The USD found itself back at the weak side of its range against the EUR and the GBP yesterday. If risk appetite among investors continues the greenback may find itself under additional pressure today.
EUR
The EUR started Monday on weak footing but as international bourses rose the currency found itself picking up value. After a swift fall on Friday the EUR proved it has some staying power within its current range and provided additional evidence that the marketplace remains volatile. The German ZEW Economic Sentiment report is on schedule today and it carries an estimate of 20.0, the previous reading produced an outcome of 13.0. The broad European ZEW results will also be issued. These reports will serve as the main sources of economic data for Europe this week. Most of Europe will be on holiday Thursday and traders should be aware that the marketplace may see a bit more volatility the next two days as institutions position themselves for what in essence will be a long weekend. Many questions persist throughout the European Union and its economic data continues to show that problems exist in many of its member states. Having had a splendid recovery on Monday against the USD after a poor performance on Friday, the EUR continues to find a strong following which may continue to pursue its positive trend today.
GBP
The Sterling gained across the board as it continued to find favor. There were no major economic reports from the U.K. on Monday and sentiment has found fuel it would appear from optimism � real or false based on returns from the stock market. The U.K. will release data today consisting of CPI and RPI but with little in the way of fear from inflationary pressure unless a major surprise were to happen, investors will likely look more towards tomorrow�s CBI Industrial Order Expectations survey. However the releases will grow in importance on Thursday with Retail Sales numbers and on Friday with the Revised GDP figures lined up for publication. The GBP has turned in a fairly astonishing run the past month as it has gained in a steady manner and showed the ability to hold its ground. Having said this, the economy of the U.K. does continue to face dilemmas like its counterparts and is clearly not out of the woods yet. With important reports on schedule towards the end of the week, the Sterling may begin to see some caution enter its sphere.
JPY
The JPY gave back a significant amount of its gains on Monday, but is still very much in the midst of a battle being waged by those with risk appetite versus those who are averse. International equity markets turned in a positive day of results and besides the JPY losing value, Gold also went down and retraced to the 920.00 USD mark off of its highs from Friday. While it may seem too easy to say that the market is being dominated by a fight of perceptions that is exactly what we are seeing. The JPY continues to be a classic barometer of risk and it will be directly affected by its winds again today.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst