The dollar rose in intraday trading based on rising risk aversion in the marketplace. The EurUsd sunk over 200 pips to the low 1.25 area, while the UsdJpy was marginally lower to the high range of 97. The GbpUsd dropped nearly 200 pips finding support near the 1.54 level. Equity markets traded substantially lower with European stock indexes like the DAX, CAC, and FTSE leading the way. Both the Dow and SPX (S&P500) are off about 2%, as GM and AMEX lead the way reflecting the severe effect of the credit crisis. Bond markets are closed in the US in observance of Veteran’s Day, however 10yr bond yields in Australia and New Zealand saw considerable tightening. Commodities continue to erode with oil down 5.3% to $59bbl and gold lower by 1.35% at $735oz.

The German ZEW data came in better than expected at ‐53.5 vs. ‐63.0, which was consistent with the higher than estimated Eurozone ZEW reading of ‐54.0 vs. ‐60.5. The stronger data shouldn’t be taken with full credibility, but a correction from the prior negative reading. The consumer confidence index remains sensitive to trends in the equity markets supporting the recent relationship between risk appetite and trading. ECB President Trichet stated that the central bank is dedicated to achieving price stability. He did also acknowledge that inflationary pressure is under control, providing for further rate cuts. In the UK, the RICS house price index was slightly better than projected at ‐82% vs. ‐86%. The UK trade deficit decreased to ‐3863GBP from ‐4737GBP. Despite the slight improvement in economic news, the sterling took a pounding as FX price behavior has been closely tied with patterns in other asset classes.

ACM Forex
Advanced Currency Markets