Markets are on edge with both bulls and bears frustrated and unwilling to take on big positions. There are two big unknowns, the first is the continuing political crisis between Russia and NATO countries. The focus has now shifted from Georgia to the proposed missile defence battery to be located in Poland. The longer this goes on without constructive dialogue from either party, the more nervous investors become. As testament to investors growing unease, oil prices have finally started to move higher, a significant development considering the recent ambivalence seen in crude prices.

The FTSE is currently indicating a lower opening as traders await the release of the UK retail sales numbers. While economists are expecting a contraction of 0.2%, traders are hedging in case the numbers come out worse then expected. Should this happen, the FTSE could open 1% lower.

The FTSE is currently indicating a higher open as traders are anticipating that the economic news from its main trading partner, European Union, comes out better then expected. Today around the same time the FTSE opens for trade, the European Union will be releasing its GDP results for the 2nd quarter. Analysts are excepting for a contraction of 0.2%, however we have heard rumours that there is a chance that the number will come out much higher. Should this happen we could see the FTSE close up more then 100 points

The FTSE is down around 1%, but the real loser today is UK PLC. The pound is crashing as various factors come to a head. Up until July, the US Dollar was the currency the world loved to hate, now it’s sterling’s turn to be punished. Today’s Bank Of England inflation report was more dovish than expected, opening the doors to possible interest rate cuts before the year is out. This coupled with a housing market that has fallen through the roof has pushed Sterling down 1.11% against the Euro, 1.3% against the Dollar and 1.84% against the Yen today alone.  

The FTSE is currently indicating a weaker open as traders are waiting for the release of the UK employment numbers. Some analysts are expecting for an increase in the unemployment rate, which will give more reason for the BOE to cut the interest rate at the next meeting. We feel that the unemployment rate will be even worse then expected, and if it happens look for the FTSE to open almost 1% weaker. 

With the conflict in Georgia seemingly reaching an impasse, financial markets have reacted with the same general disinterest they showed at the start of the conflict. Although the pipeline that crosses Georgia only accounts for around 1% global energy flow, the lack of buying interest in oil is telling. Gold too, is normally seen as a safe haven in times of conflict, but the precious metal is now just $20 or so from being in official bear market territory.

The FTSE is currently indicating a week open, are awaiting the very important UK Consumer Price Index. The Bank of England has been struggling for the last few months to maintain a balance between controlling inflation, and trying to jump start a sputtering economy. Todays data will show if the BOEs job will become easier or not. A weak CPI number will result in a very strong open for the FTSE.

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The FTSE has managed to hold on to most of the morning's gains, which were largely a factor of the strong close in New York on Friday. A relatively quiet economic calendar and low summer volume have muted activity after last week's impressive action. Banking stocks are performing well in the UK, with Barclays, RBS and Lloyds all putting further distance between themselves and the July lows. Investors are impressed that the banking sector has still been able to maintain strong earnings in the retail sector, despite the ongoing credit problems many

The FTSE is currently trading flat as traders are looking past Friday and towards the weekend, and who can blame them this has been a long and risk filled week. While there is no economic data out of the UK this morning, it seems like traders are embracing the reversal in the currency market that has been pushing the British Pound lower, making the FTSE an attractive investment to the US investors.