All that Glitters is ...Gold?

Another week is starting with markets still on the rise and investors new found confidence still very much alive. Last week we saw DOW JONES rallying for a third week and the same happened for Europe and Asia. It is clear that the latest economic numbers out of US are in line with predictions for an economic recovery as Obama and his pals promised.  Stocks are up since early Europe and the dollar is down as an aftermath as risk appetite is back for now.

The EUR/USD had a good run last week, after it broke important 1.4280 and printed yet another weekly high at 1.4320. As long as the pair holds 1.4230 for now, there is further risk to the upside towards 1.4380. For now it seems that the euro is strong against the dollar; however beware this week's ECB announcement as anything is possible from Mr. Trichet.

The economic calendar has a few important economic releases today, with PMI out of UK and Euro zone which both came out much better than expected, giving investors some kind of reassurance that indeed the worse in over and a recovery is underway. The latest data out of the UK suggest that the country has made improvements in the Manufacturing sector and it will be very interesting to see the outcome of this week's BOE meeting. The fact that BOE has adopted an almost zero rate policy for the last months after the crisis is making everyone speculate that the bank may be on the road to raising rates in the coming months if the data continue to surprise on the upside. This will be beneficial for the recent suffering pound and it looks like the GBP/USD could skyrocket in the coming weeks towards 1.73.

Also later today we have ISM Manufacturing out of US, which is expected to print another good number, suggesting that for now we may have reached the bottom. Later on in the week we have more important numbers coming out, with ADP report on Wednesday which will give us the first hint as to what this Friday's nonfarm payroll number will be. The estimates want the payroll data to print a better number of -333.000 for the last month; however the unemployment rate is still on the rise which may complicate things in the process. Investors are aware of the positive sentiment that controls the markets at the moment and they indeed go long the stocks and equities, however there is always the feel at the back of their minds that "all that glitters is not gold" and another market slide could always come back to haunt them.

Let's see how this week will start and how markets will react ahead of important economic events. One thing is for sure, the dollar has been on the slide for some time now, amid stocks and commodities rally, however if this week's payroll numbers suggest that the employment sector is still not performing, risk aversion may take the greenback back up and cause the gold to fall as an aftermath. After all, it's all about the sentiment...