May 26th 2009, Confidence Shaken Or Stirred?

The U.S. holiday produced exactly what was expected on Monday, which was a very quiet trading day. With the States closed and the long weekend being enjoyed by investors after watching a variety of markets turning in rather questionable results, currency trading this week will really get kicked off today. The USD has had significantly poor results the past few weeks and this has caused doubt to amplify in the midst of uncertainty. The U.S. stock markets have made good gains since their lows in March but concerns remain deep about the prospects for real growth. As the USD has reached the low ends of its range against the major currencies, it has certainly sparked suspicion among investors and debate about relative values.
The U.S. will see the release of the CB Consumer Confidence numbers and the S&P/CS Compostie-20 HPI today. These numbers might be enough to shake sentiment but they will likely not provide major impetus unless it is an excuse used by an already nervous marketplace. The Consumer Confidence data is expected to produce an outcome of 42.7, which would be an improvement on the previous number of 39.2. The S&P HPI is anticipated to be nearly at the same level as the last month and these marks will set the tone for the important U.S. Existing Homes Sales data tomorrow. The economic reports from the U.S. will continue to grow in importance as the week continues. Equities will be a focal point for investors this week and a correlation between the USD and Wall Street should still be in affect.

The EUR had a fairly lifeless trading session as the absence of many investors caused a rather quiet day across the globe. The German Ifo Business Climate survey was released and it came in under expectations with a number of 84.2, the forecast was 85.1. The German Final GDP is on schedule today and the anticipated number is minus -3.8%. Also the GfK Consumer Climate from Germany will be published and it is expected to have a 2.5 result. Most of the upcoming economic data from Europe will be matter of fact until the German Retail numbers on Friday. Essentially investors who focus in on the EUR will be watching news from the corporate world, including the banking sectors this week. Reports continue to surface that Eastern European governments and banks are roiling because of the recession. Also it has been reported that the automaker Porsche is now between a rock and a hard place regarding its attempted deal with Volkswagon. The EUR has shown strength the past few weeks but questions are being raised anew about the overall economic health of the European Union. Investors may be tempted to see just how long the EUR can withstand its own flaws.
The Sterling traded under the shadow of a U.K. holiday on Monday. Investors will wake up this morning and know that volume will return to norm. Having had a very good month of trading in May, traders will be keen to see if the GBP can maintain its trend. There will not be any major economic releases from the U.K. today, but tomorrow the Nationwide HPI will be published. News from the political front continues to cause a storm in the U.K. but it has had little affect on the Sterling. It is likely that the GBP will find itself trading in a dollar centric environment this week.
If any of the currencies were going to show volatility yesterday it was the JPY. However, even the JPY did not see a broad range and Asian investors seemed to have shrugged off the developing news about North Korea�s saber rattling. The JPY remains under close attention due to its strong momentum in the face of less than attractive economic data coming out of Japan. Faced with the �troubling� distinction as a safe haven, the JPY has continued to get stronger even though this is not the aim of the Bank of Japan.

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