The dollar ended mostly flat against the majors in the US trading session. The EurUsd rose roughly 30 pips to the mid range of 1.27, while the UsdJpy traded through previous support to the high 97 level. The GbpUsd slipped 20 pips putting the pair in the low 1.56 price area. Equity markets suffered losses with the Dow down nearly 1% or 73pts and the SPX (S&P500) lower by 1.27% or 11.78pts. European stock indexes were mixed with the Dax exceptionally higher, up 1.75% or 87pts and the SMI stronger by 1.37% or 82pts. Bond yields have tightened to frightening levels in the 2yr Treasury, the current rate is at historically low levels of 1.24% off 2bps from Friday’s close. The current rise in bond prices, support the notion that extreme risk aversion is still a major factor within the marketplace. Commodities were mostly mixed with oil up 2.24% at $62bbl and gold barely changed at $747oz.

The theme of govt. bailouts within the struggling financial sector and public widespread economic stimulus continue to be controlling factors in the global markets. China announced a $586bln stimulus plan which sparked a brief rally in risk appetite, but resulted in another negative day for higher yielding assets. Both the Euro and the Sterling rallied on this news, but retracted earlier gains towards the end the trading the day. We need to see a break in the recent trend of trades based on extreme risk aversion before the fundamentals become a price driver again. UK PPI dropped substantially but did little to lift the Sterling whereas in a more stable environment this data would have had a stronger affect. French Industrial production dropped less than expected at ‐0.5% vs. ‐0.6%, but similar to the UK data it had minimal effect on price behavior. We are likely to see more significant changes following the inauguration day, in which the next G20 meeting will be with a new US President.

ACM
Advanced Currency Markets