The latest data came out of the U.S. point to steady but slow growth. While strong U.S. corporate earnings are boosting the investors’ sentiment, this week the market participants will focus very closely on the minutes of Federal Open Market Committee and Chairman Ben Bernanke’s press conference. We think that any decision on further easing will be data dependent and if the pace of job growth slows over the next two months, as it did this month, we expect the Fed to act.
While Spain was not the foremost thing on investors’ minds as in the previous two days, underlying concerns about Madrid’s budget deficit, banking sector and poor growth outlook were real and constant. Some investors worry that if Spanish bond yields rise to 7 percent and beyond, it could make the country’s borrowing costs unaffordable. Meanwhile Finance ministers and central bankers from around the globe gathered in Washington for the semiannual meetings of the International Monetary Fund and the World Bank. IMF managing director, Christine Lagarde said the increase in resources, alongside the eurozone’s $1 trillion firewall, had put the world recovery on a sounder footing.
The most recent data from the Commodity Futures Trading Commission showed that speculative traders on the Chicago Mercantile Exchange continued to bet on the euro’s decline. Investors increased their open short EUR position or bets to a net $19.4 billion, according to the weekly commitment of traders report. Speculative traders decreased their open short JPY position by 13% to reach a net $8.9 billion from a week earlier on the assumption that the Bank of Japan won’t take enough easing measures next week. CFTC’s data also showed that traders increased their open short CHF position by 39% to reach a net $1.9 billion.