The week has started with markets showing more signs that economic recovery may be nearer than first thought. The Asian session was positive, closing up more than 100 points and so far European stocks are up too, with London markets closed due to Bank Holiday. The action in currencies is contained so far, what with Londoners enjoying a day away from their desks, however this week is potentially very important for the market's direction - the dollar in particular - as we have the ECB and the BOE monetary decisions, together with payroll data and housing data out of US.
The EUR/USD is still trading within 1.3160-1.3360 and so far the pair seems unsure as to which way to go. The euro is holding its recent gains; however we need to see a clear break of 1.3330 in order for further upside towards 1.35. Let€™s not forget that traders are still none the wiser about the ECB's interest rate plans and the recent differing opinions between members of the bank, including Mr. Trichet, is keeping everyone wary and cautious about the economic outlook.
Today's economic calendar is almost empty, with Manufacturing PMI from Europe earlier, printing a better than expected number and also US Pending home sales later on, which is expected to be negative once again. Apart from that, today being Monday and with UK out due to holiday, the action may be contained, as traders want to get ready for a busier week. What we see now is risk appetite coming back, and better economic numbers out of China gave investors the impression that the recession is easing.
However, we should beware of the false prophets, as one month ago, we had better GDP numbers out of China, giving everyone a short term relief that things are starting to stabilize, and come the next day, it all disappeared as Chinese officials said the numbers were not the exact truth. Let€™s see how stocks move after New York opens and if today will be the start of another positive week€¦