March 19th 2010, Cautious Winds Enter Markets

USD
The USD finished the day with gains against the EUR and GBP. The greenbacks move was bolstered by flat economic data within the U.S. and a EUR centric mode. The U.S. released weekly Unemployment Claims and CPI data on Thursday without any real surprises. Both sets of numbers continued to show that the jobless problems and the nearly deflationary statistics are realties not like to change anytime soon. Wall Street turned in a mixed day of results mirroring the rather cautious sentiment that was amplified yesterday. Today there will be no major economic releases from the U.S. and the focus will fall on the government sphere and political entanglements.
The U.S. Congress yesterday decided on a healthcare initiative which will be submitted for a larger vote on Sunday. The health care proposals are becoming not only a crucial economic focus for investors who are questioning where the money will come from, but a political hot potato for the Congressional members who will have to face their constituents after the vote. With questions looming in the U.S. regarding jobless, housing, and consumer spending, investors cannot be blamed for worrying about additional government spending in the face of existing budgets that are already showing significant shortfalls. Having said the above, the USD continues to show strength and the reason for this is because it is likely being viewed by many as the most attractive contestant in a beauty pageant consisting of less than stellar participants. While government officials contend that the stability the U.S. economy has shown will eventually lead it into stronger growth, many skeptics persists who point to problems that have not been entirely solved. The USD will move within a risk sentiment manner going into the weekend and its impetus will come from dialogues coming from many directions.

EUR
The EUR moved lower against the USD on Thursday as the weight of the ongoing firestorm regarding the Greek debt crisis continues to burn in investors ears. As much as the situation concerning Sovereign debt appeared to be swept under the carpet earlier this week, yesterday’s reemergence of the entire imbroglio came back with full force. Talk of the IMF having to be involved in a bailout for Greece was enough to spook the market place. Investors must question the implications that any move by the Greek government would cause if it seeks help from outside the European Union. Current Account Balance figures for Europe were published yesterday and proved disappointing. Today the German PPI data will be released and it is expected to be nearly flat. Simply put the crux of trading momentum for the EUR will likely remain in the framework of all discussions which are publically displayed regarding the Greek debt crisis. The EUR lost ground yesterday and it will go into the weekend with a strong test.
GBP
The Sterling faced headwinds on Thursday as it lost value to the USD. The Public Sector Net Borrowing statistics were released from the U.K. yesterday and they turned in disappointing numbers coming in with an outcome of 12.4 billion compared to the anticipated amount of 14.6 billion. The figure highlights the continued tightening of belts by banks and their clients as a cautious approach to the recovery remains strong. There will be no major economic data from the U.K. today but MPC member Paul Tucker will be speaking. With a national election coming up in the rear window, government officials and politicians are focusing more it would appear - on monetary policy and its implications on the budget. The question facing the government is how fiscal stimulus is going to be tightened and in what timeframe this will take place. The GBP also may continue to feel a EUR centric sentiment entanglement with its trading today.
JPY
With mixed trading taking place on international bourses and concerns about Sovereign debt coming into focus again, investors proved that the JPY and USD pair is a rather risk adverse place. The currency pair has kept a consolidated range all week, and with so many questions hovering from the major economies, Asian investors and their counterparts appear set to go into the weekend content with the range trading that is taking place.