Mark it down, carve it in stone, when the next round of the blame game comes many national governments will not accuse their own but start to point their fingers abroad. Countries will begin to accuse ‘competing’ nations of currency manipulation. Nations will say one country is spending too much, while others will say more should have been spent.
The EUR continues to traverse the higher parts of its value but has fallen into a range dance seemingly content to waiver between support and resistance. It will be a light day of economic data from the continent, only the ECB Monthly Bulletin will be published, tomorrow there will be little of significant data coming either, but the fact is this – Germany’s raw statistics via manufacturing and factory results are beginning to not only look sluggish but down right worrisome. While the E.U. on the surface maintains that the worst of the financial crisis is behind them, Spain, Greece, and Italy all have tough days ahead meaning the European Union will have problems collectively. Unemployment represents an obvious problem day-to-day for these nations, but coming up from down the road may be ‘inflation’ via food prices this spring and growing public unrest.
The U.S. will release the Philly Fed Manufacturing Index today and its result should be watched, because the recent Empire State Manufacturing Index missed its estimate by a wide margin. Equities have turned in lukewarm performances the past few trading sessions as problems have come to light for Apple and Boeing, two of the largest American corporations. The USD has been trading within its weaker realms as the Federal Reserve has continued to let it be known that some form of stimulus is not only being used but remains on the table should more be needed. One of the key figures from the Fed is the Chicago President, Charles Evans, who has taken the torchlight regarding further stimulus and appears to be leading the parade at this time for the central bank.
And standing closely by in the wings from the U.S. is the debt ceiling saga which is ramping up in rhetoric from political quarters. This is a fight that is not about to disappear quickly. While Digital Markets Advisor correctly predicted that a ‘limited agreement’ would be found for the so-called ‘fiscal cliff’ it is our opinion that Republicans will not cave in to Democratic demands easily this time around and that the debt ceiling talks will turn into a battle ground that will affect investors.
Gold as of this morning is around 1678.00 USD. Crude Oil is range trading near its highs but has not shown an ability to burst through its resistance and does look over priced in our opinion. Speculation, in other words risk taking, is surely still a part of current market conditions. While reports about crop conditions in S. America appear calm for the time being, grain producers in the Midwest from the States are growing more concerned with a drought that has not delivered much in the way of needed rains and could affect planting in the coming months.
The broad markets appear nervous from our perspective. Asian bourses have tumbled in many respects the past two days, but this came after large gains. The JPY has gained some value the past two days, but the official mandate from the Japanese government and Prime Minister Abe are still very much in favor of stimulus – meaning a weaker Yen.
Recently financial officials from various corners of the world have ‘harped’ upon the weakness of the JPY and USD, the strength of the EUR and other currencies. It is our conclusion that if economic conditions do not grow better in Europe, if the U.S. falters in an agreement for the debt ceiling, and the Japanese stimulus mandate fails to produce needed growth that the months ahead will become filled with governments pointing fingers and making accusations. In the meantime, traders do have plenty in the way of ranges to sample from and take advantage of as the global economy tries to find a steady floor to move upon.