With conditions stabilizing in the U.S., investors turned their attention towards Europe. They fear that officials will fail to contain the sovereign debt crisis, especially after rumors ignited about a possible downgrade for France, which kept demand on risky assets limited.
However the rumors were denied and markets felt some relief in the afternoon. Yet it was too late for the Asian stock markets which fell today by almost 0.4%. Stocks in Europe managed to rise after some French banks defended their status, giving an upside push to the euro as well.
Concerns from a damaged financial system kept confidence fragile and investors will seek shelter if any bad news will emerge from Europe or the U.S. As uncertainties continue to be high and the outlook for the global recovery unclear, the earnings expectations for exporters started to drop.
As sentiment witnessed some improvement and the U.S. equities are expected to continue rising today, demand on the USD dropped. The dollar index fell to the lowest at 74.32 and now is trading around the 74.50 level. Markets await today the release of an improved trade balance report and a weak jobless claims report.
The CHF weakened today after officials indicated they might act again to stop the Swiss Frank’s strength. The CHF was trading around 0.7390 as of this writing. The Yen however continued to strengthen reaching the lowest of 76.29 despite BoJ’s record intervention last week.
The AUD rose today although the economy witnessed an unexpected rise in the jobless rate. However the gold’s strength and the appetite for risk sustained the Australian dollar which is trading around the 1.0270. The euro is trading with an upside bias around the 1.4240, while the GBP is trading at 1.6155.
The Chinese yuan rose today beyond 6.4 per dollar for the first time in 17 years. The country’s strong economic growth is giving investors the confidence to buy the yuan especially after the U.S. vowed to maintain the interest rates near zero till mid 2013.
Gold climbed to a new record high today breaking the $1,800 level. However for now it retreated towards the $1790.00 after the margin on gold contracts was increased 22% by the world’s largest futures market, CME Group Inc, since the volume of gold’s futures and options surged to a record on Tuesday.
Crude oil extended its gains today supported by a weaker dollar and the rise in risk appetite, and as of this writing is trading around the $83.00 per barrel level. Europe and U.K. will be light with fundamentals today, however tensions will continue to be dominant and volatility will persist within the Forex markets.