Caution Keeping Gains Limited

Forex markets witnessed limited gains today, since investors were encouraged to avoid safe haven due to the rise seen this morning in the equity markets; yet the uncertainties surrounding the outlook for global growth is putting negative pressures on the higher yielding assets.

The European debt crisis plays a big role in the caution prevailing on markets. The French and German meeting in Paris proved ineffective yesterday. Merkel and Sarkozy proposed a eurozone government to oversee EU’s finances for a greater economic discipline within the European nations.

But since no immediate financial measures to counter the accelerating debt crisis in Europe were seen and no other details were revealed, market participants were disappointed, which brought losses to the euro and the European stocks early this morning.

But as the day passed investors were encouraged by the rising equity markets in Asia, which rose on improved earnings, while in Australia a report indicated that wages grew at a faster pace which improves the country’s economic outlook. This drove the AUD higher today, trading around 1.0526 as of this writing.

As investors started targeting the higher yielding assets once again, the euro rose today and now is trading around 1.4430. The pound however fell trading around 1.6405 after the jobless claims rose in July, while BoE minutes indicated that there were no votes for a rate hike this month.

The dollar index is trading with a downside bias around the 73.80 level. The U.S. will release today its PPI report for July in addition to the EIA crude oil inventories data expected to show an improvement from last week, giving an upside push to oil prices, which is trading around $87.78 level.

The Japanese yen, the CHF and the precious metal continued to climb, showing that caution is still present, where the yen is trading around 76.54, gold is trading around $1792.85, while the Swiss Franc is trading around the 0.7860  level especially after the fresh SNB steps were disappointing.