European data opened this morning with unimpressive numbers showing that German Retail Sales have slumped minus -2.8%. They also indicated that French Consumer Spending fell by minus -0.2%. Both sets of marks were worse than expectations and additionally the Unemployment Rate for Europe has grown to 11.7%. These numbers cannot be easily glossed over and no matter what appointed officials claim, the E.U. continues to show that its crisis has many hurdles in front of it, including the possibility that Germany could fall into a recession itself.
U.S. GDP came in at 2.7% yesterday, but weekly Unemployment Claims were slightly worse than predicted. The U.S. will have Personal Spending figures and the Chicago PMI report today. Wall Street finished with slight gains on Thursday, but the great ‘promise’ of a limited agreement regarding the budget and its ‘fiscal cliff’ appear to be in trouble. This weekend is likely to bring about more political posturing from Democrats and Republicans as they point fingers at one another. However, one thing is clear, in order for President Obama to get an agreed upon mandate compromises not only from the Republicans but the Democrats as well will be needed to get the needed signatures to ratify the budget and avert what some investors perceive as an abyss.
Most of the major currency pairs have continued to foster choppy trading, showing that for now values may test very short-term support and resistance levels until investor sentiment begins to shift. Gold and Crude Oil also remain consolidated. The battle between those who are barking that all is OK and that the global economic outlook is improved against those who see trouble ahead continues. Going into the weekend traders should be well aware that pundits from both sides will be stepping up their verbal assaults.
Europe has proven it has a long way to go in order to get its hands around its financial crisis. The EUR remains at its stronger short-term values, and for those who do not believe that the ECB and E.U. will be able to maintain its optimism regarding an ability to deliver solid growth on the continent, shorting the Single Currency may be an option.
However, Digital Markets Advisor, as much as we believe Europe has its problems, we also acknowledge the Americans have high hurdles too. And while both Europe and the United States continue to play out their respective dramas it might be wise to not only seek preservation, but think about a diverse range of investment options including some well chosen commodities. Next week will bring about central bank decisions from the BoE and ECB. And although great changes are not expected per monetary policy before the holiday season, what will be interesting to see is how both banks and their officials speak about the possibility of impending bouts of far-reaching recessions (they might prefer to call them challenges).
And not to be outdone the States also delivers Non-Farm Employment Change numbers next Friday. A cynic might say that the Republicans and Democrats might wait to see how the outcome from the employment figures before amplifying on their current rhetoric about the budget and the implications of a ‘fiscal cliff’. Meaning that we may continue to see fairly cautious trading for the next week until investors are willing to wager one political party in the U.S. will decide that they may have to bend more than the other. Interesting days are ahead.