The Swiss franc catapulted to all-time highs against the US dollar, euro and pound on Tuesday as investors scramble for shelter from escalating global risks. Despite US lawmakers passing an agreement to raise the US government’s borrowing threshold along with new deficit-cutting measures, rating agencies have put the US on negative watch. However, driving yesterday’s sell-off in stock markets was more troublesome US data suggesting the world’s largest economy is heading for another hard fall. Global buyers shunned the dollar in favour of more stable reserve assets which also sent the price of Gold to a new record. The cost of borrowing for both the Italian and Spanish governments shot to record peaks which added to contagion fears within the euro zone, sending the euro sharply lower against key rivals. Ongoing UK and Japanese headwinds added to a risk adverse sentiment, prompting market players to sell currencies and hold more stable investments such as government bonds. Keeping both the pound and US dollar vulnerable are widespread fears that economies such as the UK and US may return to recession as their respective recoveries falter. With one eye on euro zone bond markets, investors will today dissect UK service sector performance followed by ADP’s critical US employment report.

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