Risk Aversion trades take centre-stage…….
… as Swine Flu continues to dominate market chatter. Unfortunately it is the unknown that is causing the problem rather than anything definite and until we know whether the infectiousness of the virus, which originated in Mexico, can be contained by the World Health Organisation then we won’t be sure of the financial impact.
The death toll in Mexico has risen to 149 and the WHO has upgraded its alert level to phase 4, one stage below the much more serious pandemic category. Phase 4 was the level at which the latter stages of the SARS outbreak was categorised. Initially the Mexican Peso and the Antipodean currencies were hit hardest but concerns remain that if the situation worsens then sectors other than just agriculture will be affected. The Mediterranean countries are earmarked as likely targets (Portugal, Italy, Greece and Spain) with a downturn in air travel and tourism at a time that these countries can least afford it.
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The Euro slipped sharply, not only on the move into Dollars but also following comments from ECB members Nowotny and Trichet. The former stated that Eurozone rates would stay low for a long time and that the Central Bank was ready to use additional measures if necessary. Trichet reinforced this message saying the ECB will take decisions on new measures at their May 7th meeting- for the next week or so, the Euro is vulnerable all round.
Today’s data is again fairly thin on the ground so we are waiting for the UK CBI trades survey, expected to have improved, German CPI, expected to show a small rise in inflation and from the US, consumer confidence and a composite house price index, both of which are hoped to show a stabilising or improving trend.
Tomorrow also marks the start of Golden Week in Japan with the country enjoying a plenitude of Public holidays. We also get the May bank holidays in Europe and the UK this Friday and Monday respectively.
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Posted in Currencies Direct Tagged: CBI trades survey, currencies, Currencies Direct, currency market updates, currency markets, currency updates, Golden Week in Japan, Risk Aversion, risk aversion trades, Swine flu, World Health Organisation 
