The markets have started the week in mild risk-taking mode as there were no further negative catalysts that materialized over the weekend. One potential positive catalyst is the news that Libya may be closer to being Qaddafi-free for the first time in nearly 40 years. This may have a positive impact for the European economy if Brent crude begins to fall which would lower gasoline prices and help reduce inflationary pressure. Other than that, Libya is more of an economic non-issue.
The major issues this week are the same as last week—the European debt crisis and whether or not Bernanke is going to embark on QE3 or hint about it on Friday at the Jackson Hole annual Fed meeting. Equities in Europe and the US are trading higher, and gold has pulled back from yet another all-time just shy of $1900.
Over the weekend, German chancellor Merkel balked at the idea of Eurobonds—“for now”. This operative language is the key. The markets would love to see Eurobonds as a solution to the crisis, but Germany fears that this solution would not force the type of fiscal responsibility required to return to economic stability. However, they are running out of time in the EU as debt-refunding issues may crop up in the near future. There’s not a lot of news this week for the Euro zone, with German economic sentiment readings and PMI figures highlighting the calendar.
The news this week will be made on Friday here in the US, but prior to that we have new home sales on Tuesday, Durable goods orders on Wednesday, and initial jobless claims on Thursday. While all of these numbers may add up to a weaker economic picture here in the US, GDP figures are expected to be revised lower on Friday prior to Bernanke’s speech.
And what exactly will that speech reveal on Friday? That is the million-dollar question as part of the market is expecting QE3, while others think that the political climate is too toxic for the Fed to pull the trigger. This is one of the reasons we have seen the price of gold move higher, as further easing is being hedged by those buying the precious metal.
Friday’s meeting has likely left the Central banks in Japan and Switzerland on hold until the outcome is revealed, though both would love to get some currency relief and would intervene if need be. But the tide may be too great to get in front of at this point, though talk of a Swiss franc peg to the Euro at 1.20 has been making the rounds.
On Friday, the UK will also be releasing its GDP figures and this may prompt the market to believe that the BOE might need to be more accommodative if the numbers come in way worse than expected. The Pound has been higher of late as the situation is deemed less dire than in the US and Euro zone.
The commodity currencies are higher today as mild risk taking is in fashion this morning. While there is little news out of Australia, New Zealand will report trade balance figures and the RBNZ will release its inflation expectations report which could signal a monetary policy bias. Canadian retail sales figures on Tuesday is the only data point for Canada this week, so expect these currencies to trade on risk themes.
The increased volatility that we have seen over the past few weeks may not subside this week as the markets eagerly await Friday’s news. Because there are fewer scheduled data releases on the docket, the markets could be susceptible to random statements from policy-makers, particularly out of the Euro zone this week.
So don’t think for a moment that it will be smooth sailing into Friday, as the markets have proved to be anything but!
The major issues this week are the same as last week—the European debt crisis and whether or not Bernanke is going to embark on QE3 or hint about it on Friday at the Jackson Hole annual Fed meeting. Equities in Europe and the US are trading higher, and gold has pulled back from yet another all-time just shy of $1900.
Over the weekend, German chancellor Merkel balked at the idea of Eurobonds—“for now”. This operative language is the key. The markets would love to see Eurobonds as a solution to the crisis, but Germany fears that this solution would not force the type of fiscal responsibility required to return to economic stability. However, they are running out of time in the EU as debt-refunding issues may crop up in the near future. There’s not a lot of news this week for the Euro zone, with German economic sentiment readings and PMI figures highlighting the calendar.
The news this week will be made on Friday here in the US, but prior to that we have new home sales on Tuesday, Durable goods orders on Wednesday, and initial jobless claims on Thursday. While all of these numbers may add up to a weaker economic picture here in the US, GDP figures are expected to be revised lower on Friday prior to Bernanke’s speech.
And what exactly will that speech reveal on Friday? That is the million-dollar question as part of the market is expecting QE3, while others think that the political climate is too toxic for the Fed to pull the trigger. This is one of the reasons we have seen the price of gold move higher, as further easing is being hedged by those buying the precious metal.
Friday’s meeting has likely left the Central banks in Japan and Switzerland on hold until the outcome is revealed, though both would love to get some currency relief and would intervene if need be. But the tide may be too great to get in front of at this point, though talk of a Swiss franc peg to the Euro at 1.20 has been making the rounds.
On Friday, the UK will also be releasing its GDP figures and this may prompt the market to believe that the BOE might need to be more accommodative if the numbers come in way worse than expected. The Pound has been higher of late as the situation is deemed less dire than in the US and Euro zone.
The commodity currencies are higher today as mild risk taking is in fashion this morning. While there is little news out of Australia, New Zealand will report trade balance figures and the RBNZ will release its inflation expectations report which could signal a monetary policy bias. Canadian retail sales figures on Tuesday is the only data point for Canada this week, so expect these currencies to trade on risk themes.
The increased volatility that we have seen over the past few weeks may not subside this week as the markets eagerly await Friday’s news. Because there are fewer scheduled data releases on the docket, the markets could be susceptible to random statements from policy-makers, particularly out of the Euro zone this week.
So don’t think for a moment that it will be smooth sailing into Friday, as the markets have proved to be anything but!
