EUR/USD: Opened at 1.3322 on Monday morning after rumours that the IMF was said to loan Italy €600 billion boosted the euro higher. However, the rumours were denied by the IMF later in the day. EUR/USD dropped down to 1.3272 before it regained its strength sending it 125 pips higher to 1.3397 on the back of positive market sentiment from Germany and France’s discussion to form a “mini union”. Risk appetite increased and weakened the dollar across the board. Once the IMF rumour relating to the loan for Italy was denied by the IMF itself, the euro lost some of it momentum and traded lower at 1.3293. The currency pair opened this morning at 1.3318 and was forced lower by Moody’s warning that they may downgrade 87 banks across Europe. The news that Fitch may place the US on “negative” outlook didn’t seem to impact the markets much as Fitch also mentioned that an actual rating downgrade is not likely until 2013. Talks that China may be included in the EU aid package has rekindled investors’ hopes that the EU is progressing in dealing with the debt crisis, and in turn helped the EUR/USD track higher to 1.3372. It is currently trading at 1.3355. Market sentiments are positive as equity markets remain strong this morning. Investors will be anxious to hear any updates from the EU meeting today that is set to discuss the plan to expand the EFSF fund. Moreover, the Italian bond auction today will also hold investors’ attention for further signs of the country’s ability to borrow funds. The US is set to release Consumer Confidence data today at 15:00 GMT. Trading Central’s outlook remains positive as they anticipate moves to the upside.
GBP/USD: The sterling gained against the dollar yesterday as the pair opened at 1.5485 and then jumped up to 1.5593 after a drop down to 1.5458. The 135 pip rise was caused by the markets risk appetite after markets digested the rumour that the IMF was said to loan Italy €600 billion, which was later denied by the IMF. It came off the highs to a low of 1.5488 in the New York session as UK CBI data came out lower than expected turning the sterling bearish. It opened in Asia this morning at 1.5508 and traded lower to 1.5468 due to Moody’s warning that they may be downgrading 87 banks across Europe, but managed to come above the open and is currently trading at 1.5530. The sterling, like the euro is also drawing strength from the news that China may be included in the EU aid package, as well as the positive data released for the UK Nationwide HPI m/m.
USD/JPY: Opened yesterday’s trading session at 77.56 and gained momentum throughout the day to reach an intraday high of 78.25. According to analysts the USD/JPY has been supported by year-end position unwinding together with yen selling from investors turning away from Japanese assets. US New Home Sales came in slightly worse than expected yesterday, which triggered risk aversion among investors and in turn spurred dollar yen buying. This morning the currency pair started the Asian session at 77.95 to later climb to a one-month high of 78.30 and has since declined back to the 77.90. This morning Bank of Japan Governor Masaaki Shirakawa cited that yen rises are driven by very high uncertainty over the global economic outlook as a result of the European debt crisis. On the fundamental data front, Japan’s unemployment rate rose to 4.5% in October, worse than market expectations. The USD/JPY could see further volatility today ahead of the EU Finance Minister meeting which will focus on the layout of the EFSF, and markets will also await the outcome of bond auctions in Italy and Belgium.
USD/CHF: Traded at 0.9275 at yesterday’s open in Asia. The Swiss franc lost momentum as it weakened against the dollar when the USD/CHF hit a high of 0.9305 after the IMF rumour was denied. As risk appetite struck the market the dollar started to weaken across the board bringing the currency pair back down to 0.9175, shedding 130 pips. By the end of the New York session the franc had given back some of its gains and euro zone fears resurfaced bringing the rate back to 0.9240. It opened in Asia this morning at 0.9220 and initially tracked higher up to 0.9245 before taking a dive below the open and is currently trading at 0.9195. Analysts’ focus will be on the EU meeting as they speculate that the IMF needs to take strong actions to find financial support. The warning from Moody’s to downgrade 87 banks across Europe appears to have not affected the USD/CHF as much as the other major currency pairs.
Commodities
Oil: Crude oil opened yesterday at 98.24. The commodity rose over 250 pips during the Asian and early European sessions as rumours that the IMF was about to lend Italy €600 billion increased risk appetite and provided the commodity with a strong bullish momentum. However, crude oil prices reversed as this rumour appeared to be false. Furthermore, disappointing economic data from the euro zone powered a wave of risk aversion, which strengthened the US dollar across the board and put pressure to crude oil prices. The commodity dropped over 360 pips to finally close at 97.79. Crude oil opened today at 97.77 and is currently trading 20 pips higher than the open price. Traders will be waiting for the US Consumer Confidence report due at 3:00 GMT today for any impact on market sentiment. Also investors will be waiting for any update on the euro zone debt crisis as finance ministers will meet today to announce details of their plan to support their bailout fund to help prevent contagion in bond markets.
Gold: Opened at 1684 yesterday and traded higher up to 1720 as analysts feel that Germany and France’s “mini-union” will bring about more fiscal discipline, offering a 360 pip increase. The precious metal lost some of its gains in the New York session as it dropped down to 1706 and opened in Asia this morning at 1710. It has been trading sideways in the Asian session between the range of 1710 and 1713. Analysts eagerly await the EU meeting today to hear how they plan to expand the EFSF fund as this may impact investors risk sentiment. Moreover, the US Consumer confidence data is also likely to affect gold prices should the data not meet the markets expectations. The bullion remains firm ahead of the meeting as well as the ECOFIN meeting tomorrow.
