The dollar fell to its lowest levels in seven weeks against the majors displacing the recent trend trading across the financial markets. The EurUsd rose over 300 pips to the low 1.33 price area, while the UsdJpy fell 137pips to the mid range of 91. The GbpUsd gained 245pips to the low 1.50 level, marking the decoupling of the risk aversion trade which has been a consistent theme in the market over the last several weeks. Equity markets performed poorly with the Dow sliding 2.24% or 196pts on weak economic data and delays with the auto sector bailout. Bond yields were mixed with the 2yr tighter by 2bps and the 10yr flat, both of which remain at abnormally low levels. Commodities posted strong gains with the crude oil up 10.25% at $47bbl, and gold increased 1.5% to $822oz on dollar weakness.

There was limited data out of the Eurozone, but Germany’s Finance Minister Peer Steinbrueck expressed some criticism regarding the way in which the BoE has handled the financial crisis thus far. He accused them of instituting “crass Keynesianism” to resolve the global slowdown. Despite Steinbrueck’s commentary, the UK plans have been received positively by domestic critics. From a trading perspective, the market clearly took their side in this debate as the Euro surged against the Sterling in today’s session. It is unclear how long the cable selling will last, but the perception that it is overvalued against the euro was asserted strongly through price activity. It important to note that MPC member David Blanchflower will retire at the expiration of his term in 2009, he is considered the most dovish within the committee.

Jobless Claims continued to rise, coming in worst than expected at 573k vs. 525k. The employment situation has deteriorated to severe levels, and the risk sentiment among investors will be directly affected by the Senate decision regarding the auto bailout. A failure within the auto sector will lead to a significant number of additional unemployed citizens, thus damaging consumer growth. PPI, retail sales, and Univ. of Michigan confidence data is all scheduled to be released tomorrow. Expectations should remain very cautious as there are few signals that indicate any improvement in the economic situation before year‐end.

ACM Forex
Advanced Currency Markets