Risk Aversion Trade Continues To Drive FX Prices

Daily Forex Fundamentals | Written by AC-Markets | Dec 11 08 01:23 GMT |

Market Brief The trend of risk aversion persists with the dollar weaker against most of the majors. The EurUsd gained a little over 100pips to the low 1.30 price area, while the UsdJpy increased nearly 50 pips to the mid range of 92. The GbpUsd increased nearly 60pips trading through the previous resistance of 1.48. Equities are trading higher in the US, which was consistent with the positive move in European stock indexes. Bond yields are still compressed below normal levels, with the 2yr at .85% and the 10yr at 2.6%. Commodities rallied across the board seeing strong gains in energy and precious metals. Crude rose 3.9% to %43bbl, and gold strengthened 4.1% to $809bbl. Economic data was weak out of Europe with French industrial production drastically lower than expected at -2.7% vs. 0.5%. In addition, Italian GDP was announced in line with projections at -0.5%. The current environment is not conducive to economic growth which is being reflected in the weak price levels. There was limited data out of the UK, and the sterling continued to trade in tandem with overall risk appetite. The sterling and euro should probably hold its tight correlation with equities and commodities into Q2 2009. Once the Obama administration comes into office and reformation programs are launched, it should cause a breakage in the pessimistic sentiment overwhelming financial markets. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.