The marketplace continued to reflect the personality of a patient that has no defined personality. The USD saw a broad range against the major currencies and as the day came to an end it did show a marginal gain. To start out the day the greenback picked up initial steam and showed signs of getting its footing in order. However, upon the release of the CB Consumer Confidence numbers and a positive outcome of 54.9, exceeding the estimate of 42.7, the equity markets soared higher � taking the USD lower. This is not the end of the story because the S&P/CS Composite-20 HPI was also released and produced a figure of minus -18.7% compared to the forecast of minus -18.4%. Perhaps this negative result moderated the bulls but it is apparent that many market participants are on focusing on any positive data they can grasp and seemingly neglecting the bad.
Today the U.S. Existing Home Sales numbers are on schedule and carry an anticipated result of 4.65 million. While many politicians and other assorted garden variety leaders are talking up the idea of stability and some are even predicting growth, there remains a contingent of the non-devout who do not believe what the government puppet masters are saying. The housing sector is a critical lynchpin in the U.S. economy and for a true recovery to take place the housing and mortgage businesses will need to show the ability to stand on its own. Today�s data is expected to be an improvement on the previous report, if that is not fulfilled we could see a swift affect across the board. The USD traded in a fairly aggressive manner on Tuesday as markets returned to full volume. Data from the States will continue to grow in importance as the week closes out, Core Durable Goods and weekly Unemployment Claims are in line Thursday and Friday will see the Preliminary GDP. The USD has borne the brunt of a diminishing trend the past few weeks, but it may be getting to a point in which it makes a stand.
The EUR traded in a dollar centric manner on Tuesday as investors returned to their offices in force. The German GDP and Consumer Climate data matched expectations dead on, thus the impact from the reports were muted. Today will be a light day of economic releases, only the German Prelim CPI numbers are due and they are estimated to show a 0.1% rise in inflation �yes, it remains a deflationary story in actuality that investors are worried about. Data will pick up a bit on Thursday with the German Unemployment numbers and the broad European Consumer Confidence survey ready for publication. Friday will bring forth German Retail Sales numbers and ECB President Trichet is due to give a speech. The EUR remains under the shadow of poor economic numbers but this has not stopped the rise in value of the currency. Investors are looking for any signs from the European Central Bank that further policy shifts may come. Next week�s ECB meeting may prove important because the central bank supposedly has reached the end of its interest rate cuts. Investors are keen to see if the ECB will produce more in the way of quantitative easing. Until then the EUR may continue to find itself trading on the back of the results from the USD and economic data coming from across the Atlantic.
The Sterling had a hectic day of trading but by the end of Tuesday stood nearly where it started. There was no economic data from the U.K. but today the BBA Mortgage Approval data is on cue and is expected to produce a number of 29.1K. The Nationwide HPI has apparently been re-scheduled until Friday. Tomorrow the CBI Realized Sales figures will be forthcoming. The Sterling has had a remarkable run the past month - in fact the past couple of months, and its stability should be noted. However, the GBP is trading at the high end of its range and there may be a slew of traders who may try to go against this grain.
Like all the other major currencies the JPY saw some volatility on Tuesday. It also had similar results finding basically the same ground that it started off on. The JPY continues to stay near the high end of its range against the USD and this underscores that caution is still prevalent among investors who are seeking a safe haven. Gold had a test of its range yesterday as it fell in early trading but finished the day around 950.00 USD. The JPY is sure to see volatility the remainder of the week on the heels of uncertainty.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst