A big week of coming data and policy events was given a kick start early this morning as the Japanese opened their trading session with a swift decline on the Nikkei. The Shanghai Shenzhen CSI 300 Index sold off also and the Hang Sang saw pressure. The JPY has lost a bit of value today, but it remains near its one month highs against the USD. Gold as of this morning has moved a bit lower and as of this writing is near 1323.00 USD. Commodities including the energy sector have turned in mixed results the past couple of sessions.
Data today will be fairly light but will begin to build into a climax as the week progresses. the U.K. will publish Net Lending to Individuals soon and the U.S. will release Pending Home Sales later. Tomorrow PMI readings will come from Spain and Italy and then the States will bring forth the CB Consumer Confidence marks. Wednesday Retail Sales figures will come from Germany and in the U.S. Advance GDP will be reported. Central bank drama then will unfold as the FOMC gets into the act later on Wednesday as the Fed releases its monetary policy and outlook. Chairman Bernanke will take the podium and answer questions which should create a nice transition as the ECB and BoE take the helm on Thursday to offer their thoughts.
Finishing the week with a bang the jobs data parade culminates with the Non-Farm Employment Change numbers on Friday from the States. As the last week of July faces investors and they begin to think about their long August holidays if they are lucky, traders will be confronted by a market that has seen spectacular gains among many equities and a currency market that is trending, meaning that an interpretation of short-term resistance and support ratios will be a key to the psychology of the market.
Also on the horizon but not gaining enough attention is the exposure that financial houses and governments may have to the Detroit Municipal Bond fiasco which is beginning to come to light. And the rumor mill is starting to swirl about the next Federal Reserve Chairperson and who President Obama may be favoring.
The forex market is likely to range trade until Thursday when the central banks begin to enter the fray in totality. BoJ Governor Kuroda spoke early today, but the JPY did not trade frantically when his speech mostly met expectations. The ECB and BoE also are not expected to surprise the markets this week and would like to go into August in a comfortable fashion. Thus, it is the political front and the synergy that politicians bring about with central bank policy that could spark the most interest. This if elected officials feel the need to step in front of the microphone to express their belief that all is well and the public should rest easy. The northern hemisphere is well within the midst of the summer and the markets remain calm. And we believe most politicians would like to rest in August too.
Even though a great deal of data and news events will come forth this week, Digital Markets Advisor believes that the real implications of anything that comes to light in the coming days will not get much attention and that the broad markets will stay within their current modes of testing ranges. The fact that the Detroit situation is still largely not understood regarding Municipal Bonds, Europe’s recession has not been solved, China’s economic downturn is worsening, and the future of the Federal Reserve leadership is a mystery – all remain concerns have not caused too much worry as of yet. Divorced from reality could be a way of describing it all.