By FX Empire.com

Although risk appetite seamed relatively stable this morning, broad markets fell considerably as the European debt crisis continues to dominate the global scene amid the lack of major economic fundamentals.

After Italian Prime Minister Silvio Berlusconi offered to resign next week since the parliament passed the austerity measures, markets felt some relief, and the euro gained, as well as the Asian stock markets.

Nikkei 225 rose today by 1.15% and Hang Seng rose by 1.71% especially after China reported a slowdown in the country’s inflation during Oct. which could suggest that the central bank can reduce measures to cool the economy.

However since Greece is still in talks on forming a new interim government for the third day, while Europe’s inability to contain its debt crisis seam to be more probable, investors abandoned the high risky assets, heading towards safe haven.

As a result the European stocks averted the early gains, where the FTSE 100 fell 1.50% while DAX fell 2.41% and CAC 40 fell 2.25%, especially after the Italian bond yields rose to the highest since the euro’s introduction in 1999.

Italy became a key focus for investors since its debt of $2.6 trillion is the biggest in Europe, and Berlusconi was obstructing many of the economic reforms needed to help Italy avoid sinking into a debt crisis.

The euro dropped today from the highest of 1.3858 to the lowest at 1.3655 where it is trading as of this writing. The pound fell from the highest of 1.6119 to the lowest of 1.5977 after UK reported a disappointing trade balance report.

As demand on the safe haven USD intensified the greenback rose from the lowest at 76.50 to the highest of 77.39 where it is trading as of this writing. The yen is almost unchanged at 77.68.

Oil prices reached the highest of $97.30 today after China’s inflation slowed by the most in almost three years, giving officials more room to support growth. Yet as risk aversion intensified it fell again trading around $95.60.

As the dollar rose, commodities fell today. Gold is trading with a downside bias around $1784.00 per ounce. The AUD fell sharply today as fears were reignited trading around 1.0243.

Originally posted here

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