June 11th 2009, Risk Appetite Awaits Impetus

The USD experienced a round of whipsaw trading on Wednesday as it started the day on a weaker footing but gained as Wall Street began to slump late in the day. Trade Balance figures from the U.S. came in with an amount of minus -29.2 billion compared to the forecast of minus -28.8 billion. Crude Oil Inventories came in with less reserves than estimated and this helped spur gains in the commodity. Also, Treasury Secretary Timothy Geithner delivered a speech which addressed the pay structure of executives at companies that have received TARP money in what appears to be a more realistic approach to the market economy from the Obama administration. Today the weekly Unemployment Claims numbers are on schedule and they are expected to produce a number of 614K compared to last week�s result of 621K. Retails Sales data is also on the calendar and both the Core and broad numbers will be watched carefully and are forecasted to produce positive results.
Today�s publications and tomorrow�s University of Michigan Prelim Consumer Sentiment survey will serve as the lynchpins for USD volatility this week. Having come off of its lows against the major currencies last week the USD has experienced cautious trading the past few days. U.S. equity markets continue to indicate that they are having trouble climbing higher after their gains from off of their lows in March. Therefore the data today and tomorrow will offer investors another window in which to project the long term health of the American economy. Last weeks jobless data produced contradictory results and traders will be more than keen to see if the Unemployment Claims statistics offer a glimmer of hope or dampen expectations. The USD appears to remain largely at the mercy of investors who are viewing it as a risk appetite venture. If the U.S. economy shows strength, the dollar actually may get weaker short term. If the reports today are gloomy, the USD could find that it picks up momentum.

The EUR sputtered on Wednesday basically winding up where it started the day off as it kept within a known range. The French Industrial Production numbers showed a decrease of -1.4%, worse than the estimate of -0.3%. Today the European Central Bank will publish its ECB Monthly Bulletin which will offer insight into the data the central bank has used to guide its policy. Europe clearly is still gripped by recession and debate continues about how it will be able to cope with the crisis. Questions persist about the health of the Latvian banking system and the scope that a failure would cause other related banks in nearby countries. Tomorrow will see inflation data for Germany and France. Also the broad Industrial Production numbers will be released. This has been a relatively quiet week of economic reports for Europe and the EUR will likely continue to trade in a dollar centric mode going into the weekend.
The Sterling continues to trade near the high end of its range against the USD. The U.K. released its Manufacturing Production data on Wednesday and it produced a gain of 0.2%, better than the estimated decline of -0.1%. Trade Balance numbers were also published and the outcome was slightly negative with an outcome of -7.6 billion compared to the forecast of minus -6.4 billion. Like its counterpart in the U.S, the U.K. continues to be mired in a recession but does continue to get optimistic treatment from various officials. Bank of England member Andrew Sentance expressed his belief that the U.K. economy may be �bottoming out� and that a recovery may be possible late this year. Today the Consumer Inflation Expectations report is due from the U.K. and it is not expected to offer any earth shattering details or surprises. The market view for the Sterling like the USD remains one of sentiment based on the debate regarding the health and future of the economy and the government�s ability to navigate the waters.
The JPY produced yet another lackluster day of consolidated trading. International equity markets have had a difficult time getting off the perch this week and have showed little inclination to move and the same can be said for the Japanese currency. In what has clearly become a rather stiff amount of caution, Gold also has found its price rather unchallenged and has maintained a fixture near the 958.00 USD. The JPY like other all other assets in the marketplace seems to be waiting for impetus, until then expect the JPY to remain range bound.

Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst