To no ones surprise on Thursday ECB President Mario Draghi announced that the ECB would ‘initiate’ an ‘unlimited’ Sovereign Bond buying program. This helped produced gains in the EUR until trading ended on Friday. The EUR/USD is around 1.2817 as it awaits Asian trading to open.
The Non-Farm Employment Change number proved disappointing from the States on Friday. Fewer jobs were added than estimated. The result was 96K compared to the estimate of 123K. This will do little to help stabilize consumer confidence in the U.S. which has been showing a steady decline.
The coming highlights this week will be the German courts and the U.S. Federal Reserve.
While equities internationally have stepped into the sun, the Single Currency has flexed its muscles, and commodity prices have shown added value, traders still must consider that what has been achieved is more talk than actual quantified changes to what remains a weak global economy.
Crude Oil is near 96.00 USD and Gold is touching 1740.00 USD.
No doubt the trend has been favorable for those who have been buyers of the EUR, GBP, and other currencies such as the AUD against the Greenback.
And there can be no doubt that because of the less than promising economic statistics from the States the past few months and the perception that more trouble is ahead, investors are ‘betting’ that the Fed will announce yet another stimulus program this week.
In essence it must be remembered that we are not seeing gains because the global economy has improved, what is being seen is the hope that the major Central Banks and governments are getting their acts together. The questions are these, do the officials actually have a clear framework to achieve what they seek? Growth remains merely talk and it may prove to be just as difficult in the coming year as it has been since 2008 to do. And as much as Europe wants to cure the financial crisis they are suffering from are the right tools being used and do they have the capability to do it on their own?
Short-term the sun shines, long-term storm clouds remain on the horizon.