The NY session saw the return to risk aversion across asset classes as the worsening global financial crisis led to a sharp selloff in shares. US stocks plunged more than -5% in broad terms and the financials index declined to the lowest level since 1995. Gold, the definitive risk aversion trade, jumped more than $20/oz and was sitting just above $850 at the close. Front-end US Treasuries were bid as yields on the 2-year slipped about -2 bps to just above 0.70%. The appetite for riskless assets spilled over into FX.
EUR/USD continued to nurse the hangover on the back of the Spain credit rating downgrade and slipped about -30 pips to near 1.2900 ahead of the session close. 1.2850/40 looks like the next critical support zone here and we would shift our focus higher on a move back above 1.30 to boot. The yen crosses were appropriately pummeled as well. USD/JPY fell more than -65 pips to 89.70/80 while EUR/JPY saw a steeper -110 point decline into the 115.60/70 area.
Crude oil jumped more than $2/bbl as the February contract expired and short-covering was the flavor of the day here. Other 2009 contracts, however, showed about a -$3/bbl drop and thus we could probably write off the increase in the front month as an anomaly. USD/CAD initially followed oil, declining into 1.2560/55 lows as oil made a push above $38/bbl. Loonie traders eventually began to fade the move higher in oil (rightly so) and the pair ended NY trading about 15 pips higher near the 1.2660/70 zone.
Upcoming Economic Data Releases (Asia Session) prev est
- 1/20 23:30 GMT AU Westpac Consumer Confidence JAN - - - -
- 1/21 4:00 GMT JN BoJ Monetary Policy Meeting 21-Jan
- 1/21 5:00 GMT JN Leading Index CI NOV F 81.5 - -
- 1/21 5:00 GMT JN Coincident Index CI NOV F 94.9 - -
