OPENING COMMENT
The markets continue to show signs of a potential rolling over as currencies slowly lose their firm hold on the buck and begin to secede on the back of some ongoing concerns over the prospects for the global recovery and downbeat comments from the likes of President Obama, Germany’s Wisemen and US Treasury Geithner, who have all now warned of the risks for a double dip recession. While the OECD has upgraded its assessment on global growth, this development has hardly been offsetting with market participants very much concerned with overinflated commodity prices, as most clearly reflected through gold, which is still only just off of record highs in the mid-1100’s.
We have also been seeing the onset of a new fear from investors who are now contemplating the possibility that the markets will start to falter as the impact of global stimulus measures begin to run out of steam. While the general consensus has been to keep current stimulus measures in place, there has been no real action to inject additional stimulus into local economies, with only some small exceptions. Many analysts have attributed the recent surge in global equity prices to the aggressive stimulus measures which have potentially distorted and overstated the current rebound.
In Asia, the BOJ has held steady at 0.10% while also declaring that the economy is picking up. Elsewhere, the Canadian Dollar has been somewhat volatile after BOC Carney reminded the markets that a strong Loonie would act as a hindrance to economic growth and pledged to leave interest rates at 0.25% until June 2010. Fed Plosser was out saying that it is not time to raise rates, while he PBOC’s Zhou was quoted as saying that China is passive on the USD level.
Looking ahead, the European calendar is very thin, with the only key release coming from German PPI (0.1% expected) due at 7:00GMT.The markets have been pretty flat on the day thus far, with the Yen slightly higher against the buck, while Sterling lags and trades moderately lower. US equity futures also point to an unchanged open, while commodities are mixed.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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