FOMC & G-20 Lurk In Shadows

[mercaforex]

By Mercaforex

The USD gained against all the major currencies as Friday finished up and traders headed into the weekend. Without much in the way of economic data, investors were left to judge the markets based on their perceptions and existing sentiment. The U.S. stock markets turned in a rather lackluster performance too. There will be little in the way of releases today with only the CB Leading Index on schedule and expecting a reading of 0.8%, which would be a slight improvement over the previous report. In many respects we should expect to see a marketplace that will find itself geared for the rather large news events that will begin on Wednesday. The FOMC Statement will come from the Federal Reserve in the middle of the week. Also possibly affecting the tidal pools will be the upcoming G-20 meetings that will begin on Thursday.
The USD fought its way back against the highs that the EUR made against it last week on Friday. The question that may be spurring investors is what the FOMC Statement is going to say this week. Traders will be looking for direction, it is almost a dead certainty that the interest rate will not be changed, but the crucial details will be centered on what type of money (stimulus) the Fed is going to inject into the U.S. economy or not. Viewpoints from many continue to point to the rather optimistic notion that a recovery is underway, however some are questioning the depth of this surge and warning that this ‘recovery’ will not be a strong one and take several years to accomplish. Investors will also monitor early proclamations being made by politicians who will be participating in the G-20 meetings later this week, this as officials try to put an early stamp on the proceedings. Talk about new banking regulations, restrictions on pay, and the ‘reshaping of the global economy’ may cause nervousness in the financial sector. The USD had a tough week of trading but did manage to gain some footing as the week ended. Traders may prove a cautious crowd today.

EUR
The EUR gave back some of its gains on Friday but continues to maintain the high end of its range against the USD. The German PPI data was released before going into the weekend and produced a figure of 0.5%, slightly above the forecast of 0.1%. Taking the inflation rate into context, for all intensive purposes it remains rather miniscule in Germany. Today there will be no major economic releases from the European Union. Tomorrow will be a relatively light day too, however on Wednesday there will be a considerable amount of PMI data from both Germany and France. The crux of the story for the EUR continues to be one that is dollar centric. It is possible that EUR investors will maintain this posture, taking into consideration the FOMC Statement due from across the Atlantic and the upcoming G-20 meetings which will close out the week. Traders may test the EUR today and try to gauge its range against the greenback.

GBP
The Sterling continued to come under pressure on Friday and now finds itself curiously at the low end of its range against the USD in a two week context. A very interesting aspect of the trading within the Sterling the past week is the divergent path it has taken in regards to the EUR. The GBP has been under pressure since the Bank of England hearings before Parliament held last week. The U.K. released Public Sector Net Borrowing data on Friday and it came in slightly under expectations with a number of 16.1 billion, below the estimate of 17.7 billion – however, the outcome was much better than the previous month’s total of 8.0 billion. Today there will be no major economic data and it will remain a quiet week from for all intensive purposes. Investors can expect the most significant sentiment for the GBP to come from politicians such as Gordon Brown who are certain to make public statements this week leading up to the G-20 meetings. The Sterling has suffered the past couple of sessions and will face an attentive market today.

JPY
The JPY traded to weaker side of its rather strong range against the USD on Friday. The JPY has provided plenty of fireworks the past few weeks and its consolidation the past few trading sessions may have set off alarms among traders who have watched the Japanese currencies range the past several months. Gold maintained its rather tight band as it bounced along the 1000.00 USD mark. Trading for the JPY could prove delicate the next couple of sessions.