The market continues to fluctuate amid the lack of major data today especially from the US, where investors are reassessing their holdings and reconsidering their decisions amid the continued volatility in data clouding further the outlook.
This week was indeed very volatile, just in general we can surely agree on one thing that there was a sense of unwinding of fear over the European debt crisis as investors grow closer to the notion the EU tried strongly to print, that no one will fail, no default will be seen, and they are ready to control the situation!
Regarding the euro area, surely the successful bonds sale by Spain was a lift of sentiment, supporting the euro unwind some of the pessimism it was haunted with; nonetheless, for one, I would like to draw your attention to a key element in this sale, it was surely a catch for investors with the discount and the high return, just again they did buy the bonds and we are to witness the reason in speculative heavy movement in the market in the coming period, so we are not taking anything for granted just yet!
The euro was trading little changed mid session around 1.2370 off lows at 1.2356 and below the highest set at 1.2416. This week the euro is to end with the second consecutive gain versus the dollar rising off opening levels at 1.2128.
We are surely confident that the euro area will not collapse and that the situation is not as horrible as sought especially in May, yet we still see that the bearishness is heavy on European shoulders and speculation will continue to be the main power play. That latest of the series of speculative supports was from neighboring Russian president, Dmitry Medvedev as he does not rule out the collapse of the euro as the union struggles to contain its debt crisis.
Raging deficits and soaring debt is the main control, yet the focus and the agony of infliction varies from one continent to the other. Europe remains under the spotlight due to the fragile state of some of its indebted nations, though that does not rule out the perplexity of the situation in other nations, like UK and Japan!
Starting off with the UK, the new government is still determined to control the raging post-war record deficit that the Labour mounted for them in the past 13-year rule, which inflated in the past years following the agony of the financial crisis and the longest recession on record.
Today, UK posted a lower than anticipated deficit in May though that does not mean that their journey to trim the deficit is a walk in the park. Rising tax receipts amid the starting recovery in the nation helped control lending and supported Osborne ahead of next week's emergency budget on June 22. Still the problem is surely huge and growth might be affected though not severely as the government plans to introduce a new round of spending cuts.
Sterling was supported in the past period on the conscious and aware planning by the government to control its finances easing further fears over their risk to lose the triple A top credit rating. Sterling no is little changed around opening levels of 1.4815 and still off lows at 1.4799 where the pair reversed lower from highs set around critical and strong resistance area at 1.4885.
The sentiment is tending towards the need for prudent fiscal consolidation sacrificing growth prospects for now. That is why we see sterling not steady on gains or the Japanese yen at that matter! The yen also advanced on the government pledges to cut the debt which is the highest among nations. The USDJPY trended lower setting a low of 90.43 leaving the high recorded at 91.07 and currently trading around 90.70 areas.