We are already almost half in the year and market conditions have not changed dramatically over the last few weeks. With all the important economic events out of the way – G20 and G7- markets are still none the wiser about the future of the global economy. President Obama’s message during the G20 was clear, all world leaders must unite and fight the current economic crisis and only this way will we see a recovery. Markets did rally as they welcomed the communiqué, however in the aftermath there was strong realization that “where there is smoke, there is fire” and markets were down once again.

With UK economy still in the dumps, ECB monetary policy so mixed as Trichet and co keep giving us mixed signals about their monetary stance and also President Obama’s unlimited efforts to bring confidence back in American people, it is crucial to see how the next coming months will play out and if indeed there will be light at the end of the tunnel for traders across the globe. The constant battle between risk appetite and risk aversion is the theme of the markets currently, what with the newest swine flu “spreading” all across the media and investors trying to seek comfort and safety in the dollar as it is perceived the safe haven currency for now. So far, risk aversion always prevails and until we see better economic numbers getting released on a more permanent basis, traders will continue to seek safe haven assets.

It is obvious that futures and equities managed to sustain the upside and it will be interesting to see how DOW JONES will behave in the coming weeks.

For now, things to watch are gold rising, which is visible once again, and the correlation it has with futures and equities, as it always manage to find buyers when the market sentiment is low. News that Asian central banks diversify its assets to gold is giving gold bulls more reasons to go long, despite the IMF’s recent implication they will sell a considerable amount of their gold holdings over the coming months.

EUR/USD needs to keep 1.30 level for now, if more upside is to be seen. However a clear break may give the dollar bulls the upper hand and make the euro weak again. It seems like markets are stalling lately and there is no particular catalyst for traders to commit either way…