This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Global Macro: More Data, More Volatility

NEW YORK ( TheStreet) -- As markets digest new information in the coming weeks, volatility will continue.

This week, investors will look to nonfarm payroll data. With so much being tied into the U.S. employment situation, the level of job growth reported could determine whether monetary tightening in September is more or less appropriate.

Also, this week, the Bank of England and European Central Bank will hold meetings, and along with the U.S. jobs report, will prompt heavy trading volume as central banks have played such an important role in influencing the directions of markets this year that keeping an eye on currency markets is essential.

The first chart below is of PowerShares DB US Dollar Index Bullish (UUP) over CurrencyShares Euro Trust (FXE).

According to a Reuters survey asking when the Fed will tighten easing measures, more than half of the economists polled stated September.

Fed officials restated last week that policy continues to be tied to data more so than to a specific timetable. When Federal Reserve Chairman Ben Bernanke gave a detailed timeline at the Fed's meeting in June, markets began discounting tighter policy that was years down the road.

Although markets may have overshot, the general trend of world economies is still on a steady path. As the Fed considers slowing down its bond purchases, the ECB aims to lower youth unemployment in Europe and enact policy that accommodates gradual economic growth.

The divergent nature of the central banks' policies should lead to a stronger dollar and weakening euro. The pair below looks to trend higher and eventually break through its upper resistance line in coming months.

The next chart is of iShares Barclays 1-3 Year Treasury Bond (SHY) over iShares Barclays 20+ Year Treasury Bond (TLT). The pair is a measure of the Treasury yield curve. As the price moves higher, the curve steepens as short-term rates fall faster than long-term rates.

The curve spiked higher as speculators sold long-term Treasuries out of fear the Fed would slow quantitative easing. Bernanke's comments in June sent the curve spiraling even higher.

Rates overshot, as inflation and growth remain tepid, which should allow for a correction. Fixed-income products should increase in demand as investors realize that they have discounted rates too far into the future.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
FXE $110.15 0.00%
SHY $84.80 0.00%
RSP $82.21 0.00%
SPY $210.72 0.00%
UUP $25.03 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs