DXY Slumps to Three Week Low: The Dollar Index fell as rumors of a debt deal in Europe crossed wires. The DXY tumbled below 75 and fell back to the 74.40 level. The index is once again under selling pressure as headlines that the S&P sees a 50% chance of cutting the U.S. rating in the next three months cross wires. Expectations of a debt deal over the next couple of days are high with the White House noting a few weeks ago that a deal must be cut by July 22 in order to create the legislation in time to prevent a default on the August 2nd deadline.
The euro has rallied to its best levels since July 6 as rumors of a debt plan to ease the burden on Greece and protect other sovereigns continue to cross wire. Early signs are that the EU will look to roll over Greek debt to the EFSF fund. This would allow liquidity into the Greek financial system to continue if the ECB refuses to provide in the event of a selective default. In addition, it would appear that the plan is to reduce the borrowing cost burden on the troubled country. Preliminary PMI numbers out of the region were poor as the sovereign concerns continue to weigh on sentiment.
The pound is above the 1.62 level hitting its best levels in over a month as concern over the sovereign debt issues recede for the morning. BoE minutes yesterday that reflected a more easy monetary policy over 2H11 have failed to impact the pound as the contagion issues take center stage.
The yen has strengthened and has broken below the 79 level against the dollar. Calls for intervention will be growing and the 78.47 post-disaster lows will be a major level to watch in the coming days.
