We are seeing a light revival in risk appetite putting downside pressure on the dollar. The EurUsd rose nearly 100pips to the mid range of 1.29, while the UsdJpy fell roughly 50pips to the bottoming out around 89. The GbpUsd gained 50pips pushing the pair back above1.43 ahead of the BoE meeting scheduled for this week. Equity markets are positive in the US and Europe with the Dow higher by 1.7% or 141pts. Bond yields followed suit as rates jumped higher across the UST curve, notably the 10 and 30yr saw the largest moves up 16 and 20bps respectively. Commodities were mixed with gold recovering back above $900oz after a volatile session, and oil up 2.2% at $40bbl.

The financial markets responded well to a series of new developments regarding the US stimulus plan, better than expected corporate earnings out of the pharmaceutical sector, and an uptick in pending home sales showing buyers are snapping up foreclosed homes. FX Traders would have benefited in short dollar positions against most of the majors, but the trend may see a reversal ahead of rate decisions by the BoE and ECB on Thursday. Inflationary pressure is easing in the Eurozone coming in at 1.8% vs. 2.1%, but it’s highly unlikely that the ECB will cut rates this meeting. If they do, it will have a tremendous impact on the Euro at which point longs will be hit very hard.

ACM Forex
Advanced Currency Markets