Dollar Strength was stopped in its tracks showing only showing gains versus the Jpy. The EurUsd rose over 150pips to mid range of 1.32, while the UsdJpy added 80pips giving the pair significant ground above 90. The GbpUsd also displayed positive momentum trading through 1.47 up 100pips. Equities managed to close higher in the US and Europe, showing a reversal in the sharp downward trend in the financial markets this week. Commodities were mixed, but gold stood out nearly recovering most of this week’s losses. Both gold and oil gained 3% which was consistent with the pattern of risk appetite. Bonds remain well into historical lows, with the 2yr yield at .72% and the 10yr at 2.3%.

Despite a windfall of negative events in Europe and the UK, the sterling as well as the euro closed strong. Traders ignored the economic story in the end, and reverted to the overall perception of risk in the financial system. The macro view is extremely bearish, and acts as a catalyst to the risk aversion trade we saw reemerge. Trichet reiterated his stance on monetary policy at an interview in Japan, where he stated 2.00% is the lowest the central bank can go. This is a dangerous methodology, as the level of systemic risk far exceeds the threat of inflation and may require more aggressive action by the govt. to ward off a prolonged recession.

ACM Forex
Avanced Currency Markets