December 6, 2011

Forex Market Outlook 12/06/11

Filed under: Forex News — Tags: cad, economy, establishment, fxedu, interest, invest, japan, morning, practice, sentiment — admin @ 6:42 am

Well it looks like S&P is at it again, reversing yesterday’s promising start to the US trading session by putting 15 Euro zone countries on negative credit watch, including France and Germany based on the potential non-actions of the EU leaders summit at the end of the week. This is similar to the actions they took against the US with issuing the warning shot, though they did actually follow through with the downgrade based on Washington political ineptitude.

However this could be more problematic for the Euro zone as yields had been declining which would help them in debt service relief. This comes on the heels of the Merkozy announcement yesterday which is attempting to provide a stronger European fiscal union by requiring countries to have a balanced budget, then imposing sanctions against those who don’t comply. They are also looking to speed up the establishment of the ESM, in addition to a change in the Basel rules over what type of assets banks can hold.

None of this is ground-breaking stuff and the S&P downgrade is essentially saying that they need to do more. Apparently they haven’t been watching the scene unfold over there and the pace at which things get done. US Treasury Secretary Geithner is over there this week to try to force action. My sense is that this meeting like the others will be more of the same.

The data in the Euro zone did look promising though, as GDP figures came in as expected showing a gain of 1.4%. More importantly, German factory orders came in much better than expected posting a quarterly gain of 5.2% vs. an expected .9%. The ECB rate decision on Thursday is expected to reveal a 25bp reduction to 1%.

Contrary to my speculation yesterday (see chart of the day) the RBA reduced interest rates 25bp to 4.25% citing global recession concerns and the problems in the Euro zone. Australian GDP figures are due out tomorrow, followed by employment figures on Thursday.

Later this morning, the Bank of Canada will release its rate policy decision and are expected to remain steady at 1%.

In Switzerland, CPI data showed a decline in prices of .5%, the most in nearly 2 years and lower than the consensus estimate of a decline of .3%. This is worrisome for the SNB who have struggled to weaken the Swiss franc to help with exports so they are considering further action, including lower the target area vs. Euro from 1.20 to 1.30 or even going so far as to make interest rates negative. Should the problems in the Euro zone exacerbate, they may be fighting an uphill battle.

As a result, we are seeing some Japanese yen strength which has received some money flows from the other safe havens on risk aversion and unwind of carry trades from the Australian interest rate reduction.

Not much happening in the UK today, with home prices coming in lower than expected. The pound has been trading in a “middle ground” somewhere between the Euro risk appetite and the Swissie risk aversion. Industrial and manufacturing production figures will be out tomorrow, followed by the BOE rate decision on Thursday where no change is expected.

There is little news expected out of the US for the rest of the week so all eyes are on Europe. This morning’s mild risk appetite has just flipped to risk aversion so we are seeing some early selling after some overnight gains. If we can make it through the first half of the US session without some Euro negativity, then we could see a late-day rally.

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December 5, 2011

Forex Market Outlook 12/5/11

Filed under: Forex News — Tags: a-fiscal-union, aussie, australia, china, decision, euro, forex, fundamental, invest, japan, loonie, number, oil, solve-it-faster, yen — admin @ 7:42 am

This week like many others in recent history is going to be all about the Euro. I’m sure you are all surprised by this; as the Euro zone has been relatively quiet of late. Ha, just kidding. Obviously the Euro zone debt crisis has been the major topic in financial markets and the impediment to market advancement.

Last Friday’s Non-Farm Payrolls report here in the US left something to be desired despite the great headline number showing a .4% decline to 8.6% unemployment from 9%. The problem is that the number of added jobs came in as expected, and the number was largely a reflection of discouraged workers leaving the workforce. While it wasn’t a bad number, it wasn’t all too great either so the markets sold off accordingly ahead of the weekend’s potential for a risk event to occur.

However this morning we are back to risk taking mode with a renewed hope that this week will be the week that EU leaders get it all figured out. Friday’s EU Leaders meeting in Brussels is expected to produce words that show progress toward finding a solution. Note that I didn’t say, “find a solution” as we are likely to get more of the same. But leaders now have to do more to assuage market fears and to slow bond vigilante attacks on the PIIGS countries as higher bond yields will hurt the process and there is no way EU leaders can solve it faster than yields becoming unsustainable.

The market would love to hear that they have found a way to have more of a fiscal union, or to at least a way to provide for better oversight. Also, Germany backing away from an outright refusal to consider Euro bonds could also help in the process. The ECB rate policy meeting on Thursday could produce a 25bp rate reduction, as Draghi has been quick on the trigger and may try to halt a potential recession before one even gets started.

Thursday will also bring the UK rate policy decision and it will be interesting to see if they do anything at this point after increasing the asset purchases last time. The BOE has been ultra-accommodative despite the inflation, and the economic data still continues to produce decent results in comparison to the rest of the world.

There are also interest rate decisions for the commodity bloc, with Australia, New Zealand and Canada expected to make no change to policy.

Global stocks are higher to start the morning, as is oil which has just reached $102. Surprisingly gold is not following suit, which could mean that oil premium is a result of the geo-political climate in the Middle East.

There is also manufacturing and GDP data due out for various countries (check the economic calendar), but by and large the biggest driver of markets this week will be the news out of Europe and if we get any unexpected rate changes from Central banks.

The markets definitely want to go higher from here and the Euro debt crisis is the only thing really holding us back. Friday’s EU meeting will be important as to how we close the week, as will various economic data due out of China including manufacturing, retail sales, and CPI.

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November 29, 2011

Forex Market Outlook 11/29/11

Filed under: Forex News — Tags: account, data, euro, fear, interest, interest-rates-, invest, loonie, trades — admin @ 6:57 am

This morning has started out with the same vigor as yesterday’s market posting early gains on the news of a successful Italian bond auction and riding what looks to at least initially be two days of gains in a row. Global stocks and commodities are higher to start the day, with US dollar weakness.

In Italy, 3-year notes had a bid to cover of roughly 1.5x meaning that there was good demand for the debt contrasted with last week’s German auction that was only 65% subscribed. It should be noted that the yield on the Italian debt was close to 8%, which is a Euro-era high and nearly twice what it was as early as 2 months ago.

What does this tell us? Well, a couple of things. For starters, it shows that the markets have some confidence that Italy will not default and that there may be an increased pace of getting the plans in place to combat this crisis. If the market feels that they can pick up some short-term debt at high yields before credible actions begin to reduce those yields, then that’s a pretty good trade.

But it also tells us that Germany may have some funding problems going forward, as the market deems yields too low to justify the “safe haven” of the Bund, which may not actually be that safe when Germany’s exposure to the rest of Euro zone debt is taken into consideration. In other words, why receive 2% in Germany when you can receive 8% in Italy for nearly the same outcome. If Italy goes down, it would likely take Germany down as well so it’s better to be compensated at a higher level.

Today begins a two-day meeting of EU Finance Ministers that is expected to produce an agreement on how to leverage the ESFS and the actions that will be permitted at the ECB. After pressure from the Obama administration, the need to act for Europe is now.

On the data front, economic confidence figures in the Euro zone came in lower than expected, but wasn’t that expected? So overall, the Euro is pulling back from earlier highs and our chart of the day from yesterday is still in tact, with EUR/USD having held that 1.3430 level.

Overnight in Japan, retail trade figures came in better than expected, showing a gain of 1.9% vs. an expected gain of .7% and household spending decreased just .4% which is better than the decrease of 1.5% that was expected. Perhaps that had to do with the jobless rate which came in worse than expected, showing 4.5% vs. an expected 4.2% which incidentally is half of what the US jobless rate is. Friday’s NFP numbers here should confirm the continued bad news of 9% unemployment unless discouraged worker have left the workforce.

In the UK, home prices came in higher than expected showing that inflation may remain stubbornly high despite the protestations of the BOE who claim that prices will magically fall back to their 2% target within the next year from the current 5% they are experiencing. While this expectation is the justification for monetary easing, the hard data suggests otherwise. Mortgage approvals came in higher than expected.

And lastly here in the US, home price figures will be do out later this morning are expected to show modest declines and consumer confidence figures are expected to show gains from last month but are still near historic lows. I suppose the news of the better than expected “Black Friday” sales and yesterdays “Cyber Monday” sales which also came in better than expected (up 18% from last year) belie those figures. Or it could just be boredom.

Fitch ratings agency finally acted on the Super committee’s failure on debt reduction and moved the US outlook to negative, which means that there is now a 50% of a US credit downgrade within 2 years. Yay for politics!

Meanwhile the markets are giving back earlier gains but are likely to rebound if we can get through the remainder of the Euro session without any negative news from the Finance Ministers meeting. So it looks like we’ll continue to trade the range, albeit a larger one.

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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 16, 2011

Forex Market Outlook 11/16/11

Filed under: Forex News — Tags: a-with-the, carry trade, china, dow, fxedu, heads-as-there, invest, mike conlon, new zealand, rate-decision — admin @ 7:20 am

Buy the dips and sell the rips. That is exactly how one should navigate this forex market as headline risk from the Euro zone is countered by the US need for stock prices to go higher. So the market action of late has been selling in the Euro session and buying in the US.

This has obviously left trend-traders and longer-term investors scratching their heads as there has been great range-bound volatility with no longer-term patterns emerging. In short, take what the market gives you.

What we received overnight out of the UK was more of the same, as the BOE inflation report suggested that further stimulus was needed to ward off the effects of a Euro zone recession and that inflation would be back under 2%– in 2 years time! What will happen in those two long years is anyone’s guess but it should be noted that they reported 5% headline inflation just yesterday.

And also speaking of inflation, the Euro zone reported in-line CPI data with the headline figure at 3% and the core figure of 1.6%, as was expected.

In the US, the headline figure came in lower than expected at 3.5% vs. an expected 3.7% and the core figure was expected at 2.1%. Yet here we are with oil prices back up above $100 (see chart of the day) and all the talk is that we are facing further recession.

Inflation is coming folks despite Central bank efforts to help economic recovery. Stagflation is actually more likely and is exactly what the UK is experiencing right now. The unemployment rate in the UK ticked higher to 8.3% vs. an expected 8.2% as only 5300 jobs were added vs. a pipe-dream hoped for expectation of 21K.

Let’s remember, these data points are backward looking and do not forecast the future, so in the grand scheme of things they are pretty immaterial other than talking points that allow Central bankers to point their policies as not being destructive. One does not need to be a rocket scientist to know that as oil prices go, so goes everything else as the cost to produce and transport are greatly impacted by energy costs.

Perhaps its time to throw another $500 billion at failed solar companies to relieve the pain? But seriously, the problem is the Fed and cheap money policy trying to offset the disaster that is fiscal policy here in the US. Every day the news that the super-committee may fail becomes louder and louder thereby making their failure a foregone conclusion.

Meanwhile, don’t think that I’m going to ignore the European crisis that is now spreading to the banks that own a lot of this bogus sovereign debt. The bond vigilantes are in full-force as I mentioned yesterday and are selling out of this junk causing yields to rise and making financing costs nearly impossible to service.

The failure of the ECB to step in as the buyer of last resort and their daily attempts at meekly purchasing some of the Italian and Spanish debt are pathetic at best. If they want the Euro zone to continue, they need to make a forceful statement that they will step in and buy to provide confidence to otherwise fearful market.

The new governments in both Greece and Italy face political challenges and it will be interesting to see if they can garner enough support to enact the measures that are necessary to save themselves.

In other words, just another ordinary day in the forex market!

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November 9, 2011

Forex Market Outlook 11/9/11

Filed under: Forex News — Tags: a-wake-up-call, aussie, fxedu, invest, live, news, nzd, problem, situation, some-support, trader — admin @ 7:32 am

There’s really only one story to discuss today and that is Italy. Italian bond yields are soaring and I mean soaring and the market reaction is not pretty. In a story of “be careful what you wish for”, Italian Premier Berlusconi is said to be stepping down next week but today’s crisis may actually reverse those wants and return him to power.

Since the announcement that he would step down after austerity measures were implemented, bond yields jumped to above 7% for the first time in the Euro-era. This is an unsustainable level and the uncertainty over the new Italian government is weighing heavily on the market.

Stocks are lower in Europe and in the US, as are commodities. Risk aversion is high right now as Italy is the third 3^rd largest Euro zone economy, as well as the world’s 8^th largest. It is clearly too big to fail and it is doubtful whether or not it could be saved.

As bond yields rise, it becomes harder for them to service their debt and creates market dislocations as everyone runs for the exit.

Making matters worse, there is no news on the docket that could potentially save us today, with the exception of a Bernanke speech later this morning. I wouldn’t be surprised at this point if his speech today is not the one he started out with earlier this morning.

And that is the problem with contagion; at first it was Greece and now it is Italy. As the size and scope of the indebted nations gets bigger, the larger the problem occurs. And guess who is up next?

The United States. That’s right, the good ol’ US of A. The budget super-committee is working right now to attempt to fix our problems and if this is not a wake-up call, then nothing ever will be. The only thing keeping US yields low right now is the threat of Bernanke and the Fed tanking interest rates and the Dollar much lower.

While it will be a difficult task to do that, the potential of QE3 may mean negative real interest rates which could be disastrous for the markets.

For the sake of global harmony, let’s hope that the situation in Italy comes to a close rapidly. Just don’t be surprised if Berlusconi is the one who comes out on top!

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October 25, 2011

Forex Market Outlook 10/25/11

Filed under: Forex News — Tags: a-recipe-for, answer, australia, china, invest, marketplace, new zealand, practice account, rsi, starts-the-game, the-market — admin @ 5:36 am

Well it looks like the market is unaware that there is major risk potential in the marketplace as stocks and commodities took off yesterday and it was “game on” for risk appetite. As a result, the Euro as well as the commodity bloc currencies moved higher despite the Euro debt decision due out tomorrow.

Does the market know something that we don’t? As often is the case, the answer is simply “no”. What the market does know is that it wants to take on risk and wants to buy stocks (especially large fund managers who have posted less than stellar returns) as corporate earnings have been largely better than expected. Throw in higher Chinese PMI data that showed that they aren’t slowing entirely and you have a recipe for gains.

But should the market be paying more attention to the risk? I think the answer is a resounding “yes”. For the devil is in the details, as they say, and what we may hear from the EU tomorrow could be detrimental to market stability. For example, how big of a voluntary haircut will Greek bond holders have to bear? 50? 60? At what point does it no longer become voluntary and trigger a technical default which in turn triggers Credit Default Swaps and then starts the game of musical chairs that is inevitably going to leave someone exposed and with massive losses?

How large does the EFSF have to be to handle these problems and prevent contagion? How will they get it there? Leverage? Partial guarantees?

The point I am trying to make here is that there are MANY questions that need to be answered and I’m not certain that there is a “right” answer. It is more likely that we are at acceptable and unacceptable viewpoints and how the market reacts will be telling. But don’t forget, the market has been rallying in a big way heading into this news. Its not like it is unaware of the issues. Yet people are buying like its just another day. And by and large it is, and I believe the hope is that the cloud of uncertainty we have been dealing with will be lifted.

What is exactly is going to happen tomorrow is anyone’s guess, but the contrarian in me tells me that when everyone is bullish, I should be bearish. We are reaching certain price levels on many currency pairs that will likely induce volatility heading into tomorrow’s announcement that is showing to be released at 10EST, though not confirmed.

If I had to guess what is going to happen (and I hate to do that because I am a trader and not a prognosticator), I think the markets will spike higher on the news, and then start a sell-off as the news trickles out. This will likely represent a pullback on what has become a “ V-bottom” reversal into an up trend for most of the pairs. However, I am going to trade what I see and not what I think will happen and I advise you to do the same.

In other news, last night New Zealand reported CPI data that was lower than expected, showing 4.6% inflation vs. the expected 4.9% which may mean that the RBNZ will be on hold for tomorrow’s rate policy meeting.

Later this morning, the Bank of Canada will issue its rate decision and are not expected to change rates, which could mean a bounce off of parity vs. USD.

In the US, home prices and consumer confidence figures are likely to have little impact, and recent rumors being floated that there could be “QE3” in the works may have been the catalyst for the market’s recent rise.

While the Fed has a dual mandate to contain inflation and promote job growth, they may feel compelled to act if nothing comes out of the Super-committee in Washington that is charged with reducing our deficit.

However for now, I am waiting on tomorrow and will not be taking any positions into the release of the “resolution”. There are just too many uncertainties at this point.

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October 5, 2011

Forex Market Outlook 10/05/11

Filed under: Forex News — Tags: account, avoid-the-topic, currency-pairs, gbp, interest-rate, interest-rates-, invest, mike conlon, number, practice account, trend — admin @ 7:06 am

Was yesterday’s intense rally just a pause in the selling or does this mark a reversal of trend? This is the million dollar question and one that the markets are weighing very carefully. The catalyst for yesterday’s move higher was none other than Fed Chairman Bernanke who stated in his speech to the Joint Economic Committee that further monetary stimulus could be forthcoming.

This gave the markets an immediate shot in the arm and they rallied on those words as the thought of more free Fed money is too good to ignore. Many thought, including myself, that given the politics of further easing he might avoid the topic, but with the recent selling taking place something had to be done. So I applaud him for his courage, though political pressure seems to be waning against complete opposition to further monetary stimulus.

This was enough to push markets higher including the Euro, which had maintained strength until this morning after Moody’s downgraded Italy by three notches and warned that further downgrades of other countries could occur. Couple this with weaker PMI services figures from the Euro zone and declining retail sales figures (-1% vs. an expected -.7%) and the economic picture doesn’t look much better than it did two days ago.

Yet for some reason the markets believe that EU leaders are making serious strides toward a debt crisis resolution this time, all but admitting that they haven’t taken this crisis seriously enough to this point. One positive note was a vote of confidence in Portugal as investors passed on an opportunity to receive early payouts from a bond issue, electing to wait it out.

In the UK, GDP figures came in slightly worse than expected, showing a gain of .1% for the quarter vs. an expectation of .2%, bring the YoY figure down to .6% from the expected .7%. While this does indeed show a declining economic picture, it is unclear if this is enough to cause the BOE to increase asset purchases at tomorrow’s rate decision.

The EU rate decision also tomorrow, though, is another story. The ECB has been reluctant to step up in the wake of the debt crisis and it will be interesting to see what if anything they announce tomorrow. They could use this platform not to change rate policy per se, but rather announce plans for how they plan to combat the debt issue. The difference between the two rate decisions is that the BOE does not issue a statement with their decision, and the ECB does.

Rounding out the news from around the globe, Australian retail sales figures came in better than expected, showing a gain of .6% vs. an expectation of .2%. This has helped push the Aussie higher in conjunction with the Dollar weakness we saw yesterday and the follow-through this morning.

The ADP jobs report came out here in the US this morning and showed an increase of private sector jobs of 91K, vs. an expectation of 75K. While this number bears no significant correlation to Friday’s Non-Farm Payrolls report, it should be noted that although Friday’s NFP is expected to show a gain of around 60K, the number of private sector jobs expected to be added is closer to 100K.

While the markets started the morning in risk-taking mode, it appears as though we are giving back some earlier gains as both stocks and risk assets are selling off a bit. While still in positive territory, it will be interesting to see if this rally can be sustained or if it was just a one-day wonder.

So today may be what we call an “inside day”, where we make neither new highs or lows as we wait for the rate decisions of tomorrow to guide sentiment. And of course any news out of the Euro zone will be dissected, though the usual “no news is good news” mantra may not hold water in this situation. Clarity form the Euro zone is needed, and not obscurity.

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September 28, 2011

Forex Market Outlook 9/28/11

Filed under: Forex News — Tags: australia, cad, carry trade, credit-default, currency, currency market, currency trading, default-at-over, fear, interest-rates-, invest, loonie, president, rate-decision, trader — admin @ 6:52 am

Sometimes it feels like Groundhog Day in the forex market as we focus on the same thing over and over again. So it should come as no surprise that again we are focused on the Euro debt crisis as there is very little other news to sway market sentiment.

Perhaps it will be best if examine the recent events and what they mean for the markets. Yesterday, Greece was able to pass the vote that raised property taxes as was required by the deal that was made back on July 21^st as part of their austerity measures.

But now there is some concern that figures that were used to hammer out that deal have now changed, which means that there could be some opposition to the already-agreed-to plan. What’s more, the votes to ratify the EFSF are just taking place now in each of the individual countries of the Euro zone, to be able to ratify the previous deal.

The vote to ratify the EFSF deal has already been delayed and is just a formality if all of the countries agree to ratify. But why has it taken so long to put it to a vote? This really should be a done deal by now, that is, if they really want to rescue Greece. If you do X, you get Y.

But now there are fears that some countries are balking and the constant delaying has kept markets on edge. I agree with President Obama when he said that Euro inaction is “scaring the markets”. Of course this elicited a pushback response about the fiscal situation in the US, which of course is true, however it doesn’t justify Europe’s behavior throughout this mess.

So the markets are waiting for the “Troika” (ECB, IMF, EC) to come back with their findings in order to potentially move forward. One of the additional impediments is that there will be multiple votes over the course of this process and any on slip-up could put Greece in default. This is one of the reasons why the CDS (Credit Default Swap) market has the odds of a Greek default at over 90%.

So what can the Euro zone do? Well the idea of expanding the EFSF by levering the balance sheet up has been dismissed as “stupid” by a German official as it could incur a credit downgrade. So much for Geithner’s suggestions to help.

Contagion is the obvious issue that plagues the Euro zone right now. If they could let Greece go without causing similar problems in the other countries with debt issues then I think they would in a heart-beat as Greece is actually a pretty small percentage of the region. Which is also why Merkel’s comments about “building a firewall” around Greece the other day were telling as perhaps there may be more of a push to that end.

Surprisingly, the markets have been faring pretty well the last two days, though yesterday’s afternoon sell-off in stocks here in the US and the subsequent follow-through in Asian markets caused some overnight risk aversion. We have clearly been trading on risk themes in the market and the correlations of currencies have been pretty strong of late.

It’s essentially Dollar and Yen strength on risk aversion, everything else strong on risk appetite. The risk appetite we’ve been seeing this week has been pretty strong, though some are dismissing it as a bit of a relief rally. We have seen expanded to declining range-bound activity in the markets, and this makes sense when we consider that it is the same things over and over again that are ruling market sentiment.

This means increased volatility as the markets proceed with caution, knowing that at any given moment, news can break from the Euro zone which could impact market sentiment. Therefore, it is very important to keep yourself informed about the news and its potential impact, as it has the ability to disrupt trades if you’re not paying attention.

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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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