We closed out last week with fear again sweeping the markets, Stocks taking heavy losses and closing near their lows. With risk firmly taking a back seat, we seen significant gains for the Yen and the Dollar against the higher yeilding currencies. The Dollar did however get sold some on the Obama Bank trading announcement, possibly on a fear of capital leaving the U.S in the light of it.
That fear was fed by the new Chinese lending restrictions undermining the outlook for the global recovery and commodity demand. Softer German ZEW surveys and continued focus on the mess in Greece weighed on the Euro and broader risk appetite. Mixed Q4 earnings, then Obamas plans to limit Bank trading operations and the doubts over Bernankes’ future just created a maelstrom of uncertainty that the market just did not like.
We do have to be cautious here and I wont be rushing into any trades early this week. Of course the issues mentioned above havent magically disappeared over the weekend.. but considering Bernankes’ non renomination isnt actually a reality yet, the details of Obamas’ plans on Bank trading are as yet largely unknown and Chinas plans to cut lending is just to try to head of inflation exactly because its economy and its demand for commodities is growing so strongly! Maybe as some more information in these areas comes to light, the market can regain some composure and the latest round of panic should subside. I wont be betting my house on that happening early this week tho, and we may have to look at further downside on equities and correlated pressure on the Yen crosses and EURUSD until the market can find that something to build some composure upon.
Tomorrows’ highlights include U.S Existing Home Sales @ 1000 EST and German Consumer Confidence @ 0200, then Monetary Policy Statment out of Japan overnight. Kicking off a very busy and inevitably volatile week.
Be careful out there!
C.
