The new week has kicked off with some wild price action and recent overdone trends have continued to show just how relentless they can be, with the Swiss franc rallying to fresh record highs against the Euro, Pound and US Dollar. A combination of safe-haven demand along with some less favorable economic outlooks in the Eurozone, UK and US, and a relatively solid Swiss economy have helped to fuel the strength in the Franc, and this market still shows no signs of let up just yet despite screamingly overbought technical studies. However, we would continue to warn of a potential sharp corrective reversal with official speak on the moves in the currency likely to emerge should things persist. Meanwhile, the Yen also has been very well bid, but to a lesser degree, and here too we see risks for corrective selling in the outperforming currency. Elsewhere, Kiwi price action confounds, with the higher yielding antipodean seemingly immune to any form of weakness, even in the face of a softer global macro environment which has exposed risk correlated assets. Nzd/Usd sits by 30-year highs, while the Aud/Nzd cross has collapsed to fresh multi-day lows. New Zealand economic data has been very solid of late, with the previous week’s GDP data coming in well above expectation, and this in conjunction with Monday’s higher than expected inflation print, has opened the door for more speculation of an RBNZ rate hike, and therefore a higher local currency. Although the results of the European bank stress tests were not as bad as they could have been, the fact that we still did see 8 bank failures, coupled with unresolved Eurozone debt issues and a worrying US debt ceiling situation, have not left investors with a good taste in their mouths and the elevated levels of uncertainty should continue to pressure risk correlated assets going forward. The emergency EU summit scheduled for Thursday will attempt to reach an agreement on yet another bailout plan for Greece, but there are still a number of skeptics out there who doubt that such a resolution will be achieved. And over in the US, the US debt ceiling deadline fast approaches and here too there is no feeling of any comforting resolution. These two storylines will likely dominate trade over the coming sessions and should have a major influence over directional movements. Looking ahead, the economic calendar on Monday is anemic, with no releases seen in European trade. The only release of note for the region has already come in the form of a discouraging UK Rightmove house price showing. But once again, economic data is seemingly less relevant given the more pressing macro themes and we would expect these major storylines revolving around the Eurozone debt crisis and US debt ceiling to continue to dominate trade. Other things to watch out for over the coming session are price action in the Franc (as we have mentioned above) and potentially some weakness in Kiwi despite stronger data, with the market to likely eventually feel the pressure of a flight to safety market environment. US equity futures are already tracking a good deal lower on the day, while oil trades flat and gold remains well bid by record highs.

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