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Forex News Top Stories Forex Market Outlook 11/28/11

The markets are off to a quick start this morning after last week’s worst-performing stock market since the Great Depression.  Global stocks are soaring this morning, as are commodity prices, particularly oil.  The Dollar is lower with risk currencies (including the Euro) moving higher.

There are two obvious factors at work this morning, but there is also a renewed hope that EU leaders will be increasing efforts to stem the debt crisis.  There is a 2-day EU Finance Ministers’ conference starting tomorrow and the debt crisis is obviously going to be the main topic of conversation.

As to what has moved the markets this morning, the first was a rumor that the IMF was prepared to make a huge loan (around 600 billion euro) to Italy in order for them to deal with rising debt costs.  This “bazooka” type action has since been denied by the IMF and is not likely to materialize.  What is more likely is that EU leaders are going to feel intense pressure to quit their bickering and solve the crisis.  The markets have spoken through last week’s sell-off so if they can’t get something accomplished in short order, it’s likely bye-bye Euro.

The other factor moving markets higher this morning is the reports of a large increase of retail sales from “Black Friday” here in the US, largely known as the biggest shopping day of the year.  I watched in amazement the reports of people pepper-spraying one another to buy stuff so for an economy that relies some 70% on consumer spending, I supposed this type of behavior is a good thing.

Today is “Cyber Monday” which is supposed to encourage on-line shopping for the holiday season so a good number from today’s activity could show that the US consumer is not dead just yet.  However with 9% unemployment, there are many who won’t be doing any shopping and this is a larger concern.

On Friday we will get the Non-Farm Payrolls (NFP) report which will show how many jobs have been added to the economy last month.  The expectation is for a gain of 120K jobs and for the unemployment rate to remain steady at 9%.  It is doubtful that seasonal hiring will show up in this report.

With such stubbornly high unemployment, it is no surprise that many are now saying that they expect QE3 to be unleashed on the markets as inflation expectations are supposed lower.  But with $100 oil and the seasonal demand that comes with colder weather, in my opinion inflation is already upon us and it is disingenuous at best to suggest otherwise,

But we will likely hear just that on Wednesday when the Fed releases its Beige Book Economic Survey.  So expect to hear the same tune from the Fed as little has changed for as we know by the failure of the debt super-committee, Washington DC is content to do nothing for the people they purportedly represent.

This lack of confidence is glaring and tomorrow’s Consumer confidence figures being reported both here in the US and in the EU will be telling.  For the majority of what plagues us stems from a crisis of confidence.  There is very little leadership today that leads people to believe that solutions are attainable so activity continues to spiral lower as fear persists.

Apparently the start of what’s known as the “Santa Clause Rally” may be starting early with this morning’s market activity.  Or perhaps it is a bit of short-covering or profit taking ahead of this weeks news.  Either way, fund managers who need a strong month to show decent performance numbers would love nothing more than to see this market rally into the year end so absent a complete Euro melt-down, we may get just that.