Ahead of today’s Beige Book, things appear to be quiet as investors anticipate the potential for clues to the health of the economy. The post-holiday return to the markets has already suggested that there may be resurgence in the risk appetite of investors, while deep, apocalyptic-style economic fears get returned to the shelf. A weaker US dollar and higher commodity prices could be indicating a return to the perceived higher-risk markets in this shorter trading week.
The US dollar closed in on recent lows, bringing another round of fresh interest in commodities such as crude oil, gold, and gas. There may still be mixed perceptions regarding the demand side of these markets amid possible confirmation of global recovery. The stronger fundamental cues appear to be taken from the US dollar and its possible slip from the top of the reserve currency heap.

A jump in the prices of basic materials, energy products, and precious metals may bode well for other currencies normally associated with an increase in risk appetites. The Canadian dollar, the Euro or the Australian dollar could all take this opportunity against the US dollar and move higher in this week’s trade.

Economic reports run a lighter schedule this week, and volatility may remain towards the lower end of the spectrum. Last week’s employment report seemed to be an echo of the recent sentiments. Layoffs are likely ongoing, but the rate of job losses is possibly slowing. The number of jobs lost was close to the anticipated value, but the unemployment rate was higher than expectations at 9.7 percent.1   The continuing impact of the unemployment rate will be watched closely, especially in regards to the way consumers may have shifted from spending to savings.

Next week will bring more economic reports, including retail sales numbers. If recent attempts to stimulate the overall confidence level of consumers were successful, then it may translate into stimulating more investors. Unless there is dismal news, dips may still be viewed as possible buying opportunities while attempts to pinpoint a correction and get short may continue to get run over.

1 http://www.marketwatch.com/story/nonfarm-payrolls-hr-block-ge-in-spotlight-2009-09-04

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Past Performance is Not Indicative of Future Results.

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