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December 1, 2011

Forex Market Outlook 12/1/11

Filed under: Forex News — Tags: australia, cad, carry trade, china, course, interest, power, practice, rate-decision, top stories, unemployment — admin @ 6:51 am

Well yesterday’s news did not disappoint, with the markets remaining near highs into the close. Today will most likely be an “inside day”, providing neither new highs nor lows. This is to be expected with a move as big as the one we saw yesterday.

But what does this all mean? Truthfully, not much. Essentially yesterday’s coordinated action makes inter-bank lending cheaper. That’s it. It doesn’t solve the problems of the Euro zone, nor does it change the political dynamic in the US. These are the things holding us back and markets could do a lot better if there was more political courage in the world.

But there isn’t. Germany still refuses to acknowledge the tremendous benefit they’ve received through their Euro zone participation and are steadfast in their opposition to helping anyone that doesn’t behave exactly as they do. There are big changes that need to made in Europe obviously, but the entire world economy is basically being held hostage by the European political process.

The economic data continues to come in as a mixed bag. Yesterday’s perfect storm showed that there are times when economies look like they are performing well; today, not so much.

For starters, in Australia retail sales figures came in lower than expected showing a gain of .2% vs. an expected .4%. Building approvals were also lower. China’s PMI manufacturing figures came in at a 2-year low, which may be part of the reason why they reduced reserve requirements yesterday.

In the Euro zone PMI manufacturing figures came in as expected but in the UK they were better than expected, which is why the Pound is tracking higher this morning.

Here in the US, initial jobless claims came in worse than expected, but the expectation was for improvement from the pretty standard 400K that has been the average for some time. Later this morning we will get ISM manufacturing figures which could reverse the mild selling we are seeing this morning.

But for now, the bigger story is the money pump into the financial system that only will serve to buy time for those that are troubled. Until solutions are found, it will be more of the same. There is still great risk in the market and it will take a tremendous effort and leap of faith for the Euro zone to solve their debt crisis.

The beginning of the “Santa Claus Rally” that we are seeing now is a welcome event, but don’t get lulled into believing that things are just peachy. Yesterday’s action occurred because someone, somewhere was in trouble and the threat of global market instability was too great for Central bankers to bear. And it also goes to show the power that these bankers can wield when things aren’t going exactly as planned.

For example, nearly everyone is shocked that the Euro is trading at current levels despite the huge mess they are experiencing. Yet when you compare it to the US dollar and the easy money policies we have, it pales in comparison.

Yesterday was also a reminder that inflation is on the horizon. The only thing keeping us back from hyper-inflation is the fact that the US housing market continues to flounder. Case in point: I was speaking with a friend last night who confided that she was terrified of buying a home despite the fact that she and her husband have good jobs and are financially responsible people.

The uncertainty that hangs over the markets and the lack of confidence surrounding the current environment will continue to hold us back regardless of what the actual data tells us. Therefore I will continue to trade this market in the short-term, taking advantage of moves like the one that occurred yesterday.

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November 25, 2011

Forex Market Outlook 11/25/11

Filed under: Forex News — Tags: a-great-figure-, a-solution-will, aud, course, currency market, dow, interest-rates-, invest, italy, not-surprising, portugal, sentiment, time, unemployment, with-the-short — admin @ 6:56 am

I hope everyone here in the US had a great Thanksgiving yesterday, though the same can’t be said for the markets. We are still in risk aversion mode as the Euro debt crisis continues to plague the global economy so the US dollar has been the favored investment vehicle of choice.

Today is a shortened session here in the US with the stock market open for a half-day session. There is likely to be little action for stocks so the correlative effects of market movements will be minimal. However, it must be noted that with decreased volume there is sometimes increased volatility.

While there is no news due out for the US session, a quick recap of this morning’s news shows that confidence figures in the Euro zone came in worse than expected. While this is not surprising, yesterday’s reports of German GDP and confidence figures were positive. GDP in Germany was 2.5% YoY, as expected. IFO confidence figures all cam e in better than expected which shows that Germany is still moving along, despite the bond auction disaster from earlier this week,

In the UK, GDP figures also came in as expected, showing .5% growth which is not a great figure. It is for this reason that the BOE has been ultra-accommodative despite the high inflation they are experiencing.

Also in the Euro zone, Portugal had their credit rating reduced to junk status, and they have been all but an afterthought as the markets have focused on the Spanish banks and Italy’s government debt.

The picture continues to worsen in the Euro zone and the push for a Euro bond is picking up traction, for those who still want to see the Euro succeed. As this situation drags out, the global economy will continue to suffer and a solution will not be forthcoming overnight.

But we are seeing a bit of a morning bounce here as perhaps some of the selling was overblown. Risk still remains at heightened levels so I’m going to continue with the short-term trading themes until more clarity emerges.

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November 21, 2011

Forex Market Outlook 11/21/11

Filed under: Forex News — Tags: a-call-for, account, bank, both-the-euro, chart of the day, course, currency-pairs, forex, forex trading, interest, kiwi, ratings, realization, rsi, sentiment — admin @ 6:59 am

Markets are selling off this morning as the realization that the debt “super-committee” was nothing more than a “super-sham” intended to set the stage for the unbearably ugly political battle we are about to see unfold over the course of the next year. While the most optimistic of us had high hopes that they might be able to rise to the occasion and come up with solutions, the most pessimistic are saying, “told you so” this morning.

However all is not lost now that the abject failure of this doomed idea has materialized, as there will be automatic deficit reductions of $1.2 trillion. The problem is that it these automatic cuts will not be made responsibly as it will hurt those who can afford it the least and will weaken our national defense in the process. Thanks a lot.

Apparently Spain is a more reasonable place and they have elected a new conservative government who immediately are getting a baptism of fire but are saying all of the right things to start. It is obvious that major reforms are needed in Spain and they appear committed to deficit reduction but this may be a losing proposition if the ECB does not do something about the rising yields in the region.

This is setting up an inter-Euro battle as the markets are calling for a TARP-like solution where the ECB becomes a buyer of last resort and keeps the bond vigilantes from driving yields higher. As borrowing costs go up it makes it harder for countries to service debt whether they undertake massive austerity or not. Both Germany and the ECB itself are dead-set against this type of solution which may be the only way the Euro in its current form can survive.

Meanwhile there is some economic data due out this week and most if it is shoved forward to the next two days as the US markets are closed on Thursday for the Thanksgiving holiday. The economic data is weakening around the globe and now China is getting into the act saying that we are facing a prolonged global recession ahead.

To give a quick run-down of what’s happened earlier today and then what to expect later this week will probably be the most effective way to highlight this week’s action. The big news from earlier this morning was that Japanese exports came in lower than expected and UK home prices fell more than expected. These figures fall in line with the stalling global growth story so it will be important to see how Central banks respond.

The release of the BOE rate policy meeting will be out on Wednesday so we will see how committed they are to further monetary easing even after they increased their asset purchase program at the last meeting despite CPI readings in the 5% range. The Bank of Japan could also be close to intervening again in its currency as recent strength has it back to levels close to highs from which earlier interventions were enacted.

Existing home sales in the US are due out later this morning and expected to have declined, and there are a bunch of ECB leaders speaking today as well.

Tomorrow will bring the release of the FOMC meeting minutes, as well as US personal consumption figures and US GDP estimates. Canadian retail sales figures and EU consumer confidence round out the day.

Wednesday is packed with the aforementioned Central bank minutes releases, as well as Euro zone PMI and industrial orders figures. US data releases include: durable goods orders, personal income and spending, initial jobless claims, and U Michigan consumer confidence figures. Essentially these figures that are usually spread out along the week have been moved up for the holiday.

On Thursday, German GDP figures highlight the docket, with very little to be released on Friday.

Frankly I am a little surprised at the market reaction to the “super-failure” (as I am calling it) as I can’t believe that anyone thought this would work in the first place. The concern is that the ratings agencies will downgrade the US yet again but we saw what happened the last time we got a downgrade—that yields in the US went LOWER as a result as the flight to safety trade kicked in.

I suppose the EU dragging its feet could also be an issue but the landslide election in Spain gives me hope that they people of Europe are starting to come around to the reality that things need to change. Once they accept it and move on, they may be able to recover.

In other words, just another week in the forex market!

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October 18, 2011

Forex Market Outlook 10/18/11

Filed under: Forex News — Tags: aud, aussie, china, course, europe, european, expectation, interest-rate, kiwi, new zealand, top stories, unemployment, usd — admin @ 7:04 am

With the overhang of the realization that indeed Euro zone leaders will not have a resolution in place by next week like the G-20 leaders asked for, it is now questionable what exactly Merkozy were referring to when they claimed to be able to have something ready by early November. Is their timetable still in play? From where I sit, it doesn’t seem likely.

So the markets have turned their attention to global economic data and at this point it isn’t pretty. Overnight, China reported GDP figures that came in less than expected but nevertheless were impressive, showing growth of 9.1% vs. an expected 9.3%. This was worrisome for the markets as this was the slowest pace China has grown in nearly two years, but some encouraging signs are that domestic demand is picking up as retail sales figures were higher than expected, as were industrial production figures.

This put pressure on both the Aussie and Kiwi as the RBA also said that they could envision a rate reduction as inflation there is “less concerning”. However, the RBNZ governor said that rates may need to move higher in New Zealand as the economic activity generated from the rebuilding from the earthquakes may no longer require stimulus.

This sent markets into risk aversion mode right away and that sentiment was carried into the European session as German economic confidence figures came in at 3 year lows. In addition, France’s credit rating is in jeopardy if the Euro debt resolution puts too much strain on the French economy though the pace that these negotiations are taking place may not make this a worry any time soon.

What we are seeing though is the signs of inflation creeping up around the globe, most visibly in the UK who reported CPI of 5.2% inflation vs. the expectation of 4.9%. I thought that expectation figure yesterday had to be wrong, but boy was I mistaken. To be clear, the BOE has an inflation target of 2%, which means it is running more than twice their mandate. I’m sure the UK citizens love this as the economy slows down. Stagflation anyone?

As bad as the UK seems, there may be a bigger stagflationary problem and that is occurring right here in the US. This morning PPI data came in hotter than expected, posting a headline figure of 6.9% vs. the expected 6.5%, with the core figure showing 2.5% vs. an expected 2.4%. This may mean that tomorrow’s CPI data could be hotter than expected and that we are experiencing inflation, despite declines in housing prices. Were it not for the drag of the housing market, inflation might be much, much higher.

Yet the markets know that Bernanke is going to do nothing about higher costs because that is EXACTLY what he is hoping will occur. Meanwhile, misguided protesters will continue to direct their anger toward Wall St. and not Washington DC even though US bank earnings are coming in way lower than expected.

But I suppose it is easier to point the finger at those who actually show up for work, as Washington DC is in full-on election mode right now which means that virtually nothing will get accomplished which at this stage of the game may be a blessing in disguise. The debt “super-committee” will likely do the bare minimum and kick the can further down the road and the blame-game politics we’ve come to endure will only grow as more and more people donate to the campaigns of these fools who have caused the economic malaise we are experiencing.

Maybe the Occupy Wall St. movement will help reduce the unemployment rate as fewer people show up to pick up their checks, though the auto-apply feature comes in pretty handy especially when you are not looking for work as you are supposed to be.

Bernanke will be speaking later today and will likely shift the focus back on the Euro zone, which is an entirely different mode of blame politics. We’ll be told that if the Europe can just get their act together then things will be alright.

Do you believe this? Me neither.

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September 16, 2011

Forex Market Outlook 9/16/11

Filed under: Forex News — Tags: aud, china, commodities, course, currency trading, eur, european, invest, japan, jpy, markets, politicians, pound, rate-decision — admin @ 6:57 am

Once again the Euro zone is in focus as the meeting of European finance ministers and bankers is taking place in Poland. However, there is one notable guest of “honor”, our own US Treasury Secretary Geithner.

Yesterday he made his presence felt as it was announced that the US Fed would provide unlimited Dollar liquidity to the European banks, essentially helping them re-capitalize as there was strong indication that many were about to face a liquidity crisis. This sent the Euro screaming higher, as EUR/USD gained about 200 pips in less than half an hour!

However, the market quickly determined that despite this shot in the arm, the patient is still not well. The Euro is selling off this morning, as there are still problems with the various regions of the Euro zone agreeing to comprehensive plan for Greece and what they need to do to receive the next round of bailouts.

So Geithner is there attempting to smooth things over and to help the process, though his effectiveness is still undetermined. The uncertainty that is still emanating from the Euro debt crisis is a major impediment to the global economy and is the major risk in the markets at this point.

However, there are additional impediments still out there, most notably declining economic figures that reflect a global economic slowdown.

While there is little significant news due out today, there is risk aversion to start the morning, despite higher stocks in both Asia and Europe. Gold has retreated after yesterday’s liquidity announcement, as it was fairly obvious that it has been trading more as a de facto currency and less as a hedge against inflation.

University of Michigan confidence figures are due out later this morning and I don’t think anyone expects them to be positive with the gridlock in Washington and the declining economic landscape.

Overnight, New Zealand consumer confidence figures came in worse than expected and declined from last month, though the Kiwi was able to rally with the Pac Rim Index.

The Pound is trading lower as the market is seeing the declining economic data in the UK and is starting to believe that further quantitative easing will be forthcoming from the BOE.

Other than these developments, the focus is really on the outcome of the European finance meeting and whether of not they can make strides toward an agreement. No one is expecting a solution in the next few days, but the politics have been difficult to overcome, to say the least.

Someone needs to step up to the plate over there and agree to do what may not be so popular, so that world markets and thus economies can improve. When risk is high in the marketplace, investors move money to “safe havens” which is essentially the same as stashing it under the mattress as it is not a productive use of capital.

While the Euro zone is not entirely to blame for the global economic malaise, the US needs to also step up and realize that without pro-business policies, the pie will continue to shrink. And when the pie shrinks, politicians go for the money grab and attempt to increase their take through higher taxes.

They then attempt to “invest” that money which if recent history is any indication, will be an abject failure. The recent $500 million “loan” to the bankrupt green energy company Solyndra is one such display of why politicians should not be able to pick winners and losers.

So hopefully we can get the politicians out of the way so Americans can get back to work and we can start to see economic health again. Otherwise, we will continue to worsen and may dig a hole so large that we may not be able to recover. And if things keep continuing this way, I’m going to start to think that is exactly what they want to occur.

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September 1, 2011

Forex Market Outlook 9/1/11

Filed under: Forex News — Tags: account, aussie, australia, course, currency trading, decision, france, interest-rates-, jobs, jpy, kiwi, live, market, ratification — admin @ 6:51 am

Europe’s woes are back to center-stage as the markets fear slowing growth and the political wrangling that is taking place over the proposed EFSF deal agreed to in July. For starters, European PMI figures came in lower than expected across the board in Italy, France, Germany, and the Euro zone overall. In addition, the markets will be watching very closely a court decision in Germany that may determine the constitutionality on Germany’s participation in the bailouts, ahead of the ratification meeting at the end of the month.

But it’s not just the Euro zone that is seeing declines, as PMI figures in the UK declined the most in almost two years to a reading of 49. However this reading matched the expectation so much of its impact has already been absorbed. Adding to further Pound weakness is that home prices also declined by .4% and the expectation was for an increase of .4%. This has put pressure on the Pound and is contributing to early risk aversion in the markets.

Chinese PMI also fell near 30-month lows and export orders fell for the first time in two years so an obvious slowdown in China would further add to the declining global economic growth story. This has put a bit of pressure on both the Kiwi and Aussie, though the Aussie is benefiting from better than expected retail sales figures, posting a gain of .5% vs. a .3% gain.

The Swiss franc is also strengthening as I mentioned yesterday that the SNB “forgot” to jaw-bone the Swissie lower. Today they have reported in-line GDP figures showing .4% economic growth, but early risk aversion is adding to buying pressure.

Later this morning, ISM manufacturing figures will be released here in the US which are expected to show a decline from last month’s 50.9 to today’s expectation of 48.5. The bar is set pretty low for this one so an upside surprise could help redeem the markets. Initial jobless claims came in as expected, with the usual 409K newly unemployed.

The markets are actually creeping higher early in the US session as we are off of earlier lows. We are starting to see a familiar pattern emerge, with risk aversion taking place in the European trading session and then that sentiment reversed in the US session, essentially leaving us near flat for the day.

While the forex markets have been trading in expanded ranges, overall market ranges seem to be contracting. This could change tomorrow, on the release of the Non-Farm Payrolls report. The expectation for job gains is at 75K which is also a pretty low number, so a downward miss could cause initial risk-aversion until the markets realize that this might actually be good for the prospect of “QE3” as the Fed attempts to fulfill its dual-mandate of encouraging employment and price stability.

Should we miss to the upside, then the opposite sentiment could occur though I think that if the number is encouraging then it could help move the markets higher, however more slowly than if QE3 becomes the expectation and not the hope.

Next week will also bring the politicians back to town (yay!) and President Obama will give his jobs speech next Thursday, though the majority of America will probably be watching the start of football, as more and more people become disenchanted with the political games we are forced to endure.

So be careful trading into tomorrow’s NFP report which is always a volatile time in the markets!

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August 26, 2011

Forex Market Outlook 8/26/11

Filed under: Forex News — Tags: a-lot-worse-, bank, china, course, efsf, expected, fear, forex market, forex trading, japanese, live, loonie, morning, news, personal — admin @ 7:32 am

Today is the day the markets have been waiting for some time, as Bernanke’s speech from the Jackson Hole Symposium is the most heavily-anticipated economic forecast in memory. We have obviously seem economic weakness and the Fed alone has been trying to tackle the issues that plague us as the fiscal side of the ledger has gone unattended due to a lack of leadership and political gridlock in Washington DC.

Speaking of political leadership, the Japanese Prime Minister Noda resigned last night after criticism of his handling of the natural disaster made him ineffectual. (Could you ever imagine a US politician doing this? Me neither!)

We received a glimpse of this dreary picture earlier this morning as GDP figures came in slightly lower than expected, showing 1% growth vs. the expected 1.1%. Personal consumption figures came in higher than expected, showing an increase of .4% vs. the expected .2%. This all adds up to slowing growth, though this is the type of report that brings relief as it could have been a lot worse.

Earlier this morning, the UK reported GDP figures that came in as expected, showing quarterly growth of .2% and a YoY figure of .7%. This also is declining growth which has the BOE policy-makers concerned and may produce some further monetary easing if conditions get worse. However, further easing could push inflation higher than the already high 4.4%, which is more than twice the Central bank’s target rate.

But back to Bernanke, what will he say today? How will the markets react? With the insane amount of volatility we have experienced of late, the response is likely to be knee-jerk and should produce wide swings.

There are essentially two schools of thought on this matter: he will either hint at further easing, or he will not. At this point, no one is expecting him to launch “QE3” though he could put forth that possibility.

If he chooses the first option and sets the table for further easing, he could do so by laying out the potential policy tools he could use. Whether its further bond buying, buying mortgages, targeting the longer duration bonds or some other measure the market reaction would likely be to sell the Dollar and jump into just about anything else.

But from a longer-term perspective, this could be offset by the problems we are seeing in the Euro zone which have gone unnoticed as the focus has been on today’s speech. Greek 2-year yields are at all-time highs and it is unclear if the vote to expand the EFSF will pass in its current form. The German stock index (DAX) is down nearly 20% this month alone!

With the specter of further easing, commodities and stocks are likely to be the beneficiary and the impact to the real economy could be little at best. This could also induce higher inflation, which would choke economic activity as well.

If Bernanke says nothing today that is new from a policy perspective, then the markets are likely to be disappointed and we could see some Dollar strength right out of the gate. Though the long-term impact is uncertain, I believe that stocks (particularly ones with high dividends) will be in favor as there really is nowhere else to put your money. The initial flight to safety trade could go on straight through the Euro vote on the EFSF as that would be the major risk in the marketplace.

Next week the politicians will be back and we’re expected to hear from Obama about his jobs plan, which was apparently too involved to reveal prior to his vacation so the country has to wait another week. Expect to also hear the rhetoric for increased government spending and not reduction to take place, as the stalemate and gridlock hopefully don’t drive us off the proverbial economic cliff.

So what will I be in prior to this speech? Nothing. As a trader, I prefer no to try to guess what is going to happen but rather to take a wait and see approach and look for potential low risk opportunities that may be created by volatility. So trade cautiously, as volatility can be your friend but can also be your worst enemy if you get stuck in the wrong trade!

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August 17, 2011

Forex Market Outlook 8/17/11

Filed under: Forex News — Tags: china, course, decision, euro, europe, fundamental, gbp, gold, headline, oil, rsi, stock, trade, with-the-value — admin @ 6:51 am

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August 16, 2011

Market Outlook 8/16/11

Filed under: Forex News — Tags: carry trade, china, commodities, course, forex, forex market, level, top stories, unemployment — admin @ 6:36 am

This morning all eyes and ears are on Europe as a meeting between the leaders of France and Germany is taking place where they are expected to produce further measures to help deal with the Euro debt crisis.

The major topic is going to be the expansion of the EFSF and guidelines for debt reduction in the countries plagued by excessive indebtedness as a percentage of GDP. But the market perhaps is looking for something more as calls for a Euro-bond that includes and is backed by all countries would help raise capital to help fund those that are in trouble. This idea seems to be gaining traction in the markets, though it is unclear if the leaders are willing to consider it at this point. Overall, Euro zone debt as percentage of GDP overall is very low so this is economically feasible, though could be political anathema.

One of the reasons is that GDP reports this morning show that German GDP grew less than expected, showing a gain of 2.8% vs. an expectation of 3.2%. Overall Euro zone GDP increased 1.7%, slightly lower than the 1.8% expectation. This has prompted a bit of risk aversion in the markets, with stock indices lower and gold trading higher.

In the UK, CPI data came in hotter than expected, showing inflation of 4.4% vs. an expectation of 4.3%. This comes a day ahead of tomorrow’s release of the rate policy meeting minutes, which some are expecting to show a bias toward easing and not tightening. It must be noted that this meeting took place before the riots, so while the BOE may be hoping that stubborn inflation subsides as economic growth contracts, the idea that further QE may be necessary could show up in this report.

In Australia, the release of the RBA rate policy meeting minutes has not deterred the market from believing that the next move on interest rates will be to lower at the next meeting in October.

The Swiss franc and Japanese yen are both higher this morning on risk aversion, and the market is speculating what further action these safe havens can taken to attempt to weaken their currencies. Both Central banks essentially have little control over the value of their respective currencies despite low interest rates and risk aversion has not quelled enough to change recent trends.

In the US, both housing starts and building permits figures are due out though the bar has been set so low that both figures are largely inconsequential at this point. The economic activity gained through these areas is probably offset by the notion that greater supply could be further detrimental to an already floundering housing market.

Even though the ranges have tightened from last week’s excessive volatility, triple digit moves on the Dow are still taking place. Today the major event will be the press conference after the Franco-Prussian meeting today on the Euro debt crisis and what they have resolved, if anything, to do. So there could be some mid-day volatility after the European markets have closed.

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July 21, 2011

All Eyes On Europe!

Filed under: Forex News — Tags: cad, china, commodity, course, europe, fear, fxedu, greece, live, lower, new zealand, practice account, sentiment — admin @ 7:36 am

Today’s meeting of Euro zone Finance Ministers, bankers, and power brokers is intended to produce a solution to the debt crisis that plagues not only Europe but the global economy as well. While the immediate problem is Greece, the larger and more pressing problem is how do they prevent contagion to Spain and Italy.

While there are many different proposals floating about, the bottom line is that the politically expedient needs to be cast aside in favor of a solution. Apparently France and Germany have come to an agreement in principle, with the details to be released later today. Bear in mind that even if they do come out with a resolution (which is unlikely to be complete by today), the market may not like the terms.

Here in the US, the news yesterday that we may be close to a debt ceiling deal has taken an about-face and there is so much confusion and obfuscation surrounding these talks that it is fruitless to try to forecast when or if a deal may be forthcoming.

Overnight in the UK, consumer confidence and retail sales figures came in better than expected, though lower expectations mean that it is easier to clear the hurdle. Nevertheless, this is an encouraging sign for the UK as the government austerity kicks in.

Euro zone and Chinese PMI figures came in weaker than expected, showing signs that the global economy is starting to slow. Yet the market is rebounding and has flipped from risk-aversion to risk-taking mode as optimism over the Euro debt deal is starting to increase.

In the forex market:

Aussie (AUD): The Aussie has bounced off its lows of the morning after the market took lower than expected Chinese PMI figures as a sign that Australia’s exports may decrease as demand in China slows. However, risk sentiment has picked up so the Aussie is nearing resistance at 1.08 vs. USD. (Click chart to enlarge)

Kiwi (NZD): The Kiwi reached an all-time high vs. USD at .86 as hopes of a rate hike in lieu of an expanding economy have the markets enamored with the growth story.

Loonie (CAD): The Loonie is mostly higher as risk appetite has increased and oil prices have rebounded to just below $99. Tomorrow is the release of both CPI and retail sales data which may show further economic strength which could lead to increased rate hike bets.

Euro (EUR): While PMI figures were down, the Euro is up and trading above 1.43 vs. USD as the market is hopeful that a solution for the debt crisis is coming. I wonder if this will be a case of “buy the rumor, sell the news” for the Euro today. (Click chart to enlarge)

Pound (GBP): The Pound is also higher as consumer confidence figures came in better than expected, though lower than last month’s reading, posting a 51 vs. 49. In addition, retail sales figures came in better than expected, rising .2% vs. an expectation of no change.

Swissie (CHF): The Swissie is mostly lower as demand for safe-haven asset has decreased with the risk-taking in the market. Declining trade balance figures show the effects of a stronger franc on the economy.

Dollar (USD): The Dollar is weaker across the board as risk appetite has increased due to the dual-action of the potential Euro debt resolution and the fact that the economic data here, namely initial jobless claims, continues to be weak. This means that the market could be expecting QE3 from Bernanke and the Fed.

Yen (JPY): The Yen is weaker vs. all but the Dollar and this relationship needs to be watched closely it could be a catalyst for BOJ currency intervention. Trade balance figures came in better than expected which means that Japanese exports are improving as the recovery from the natural disaster takes effect.

So the markets will continue to wait for the news out of the Euro zone meeting in Brussels today and there could be major volatility surrounding the release of their statement as the market weighs on every word.

While the markets have been flying so far this morning, I am going to exercise caution as I’m just not as positive as others. Buy the rumor, sell the news has always been a trading mantra I’ve adhered to, so it will be interesting to say what is going to happen later today.

But for now I’m content to take profits, and looking to re-establish positions as the news is released.

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