Risk aversion gripped the market overnight on speculation that some European banks will be downgraded on the back of losses linked to their Eastern European exposure.
The German ZEW economic sentiment survey jumped to -5.8 from -31.0, the highest since August 2007, but even this could not help get risk trades off the mat. Gold has surged about $22 on the day thus far to $964/oz while US Treasuries remain better bid as the flight to safety continues.

EUR/USD continued to lose ground and shed another -20 pips towards the 1.2620/30 area ahead of the NY open. The 1.2550 early December low now looks like the next critical support zone. Need to see back above 1.27 to shift the short term focus higher as well.
The yen crosses continued to edge lower as well with USD/JPY down -40 pips near 91.80/90 and EUR/JPY losing a more pronounced -60 points into the 115.90/95 area.

The NY session now sees plenty of US economic data to bite on. The NY Empire manufacturing index is expected to slip to -23.8 in February from -22.2 prior. Meanwhile, the homebuilder sentiment index for February is expected to remain steady at the all-time low 8 level. We would expect that worse than anticipated results here should see risk aversion accelerate. In other words, lower EUR and JPY crosses on the follow. President Obama is expected to sign the massive $787 billion stimulus package today as well, but the market looks to have already given it a big thumbs down.

Upcoming Economic Data Releases (NY Session) prev est

  • 2/17 13:30 GMT US Empire Manufacturing FEB -22.2 -24

  • 2/17 14:00 GMT US Net Long-term TIC Flows DEC -$21.7B $20.0B

  • 2/17 14:00 GMT US Total Net TIC Flows DEC $56.8B - -

  • 2/17 18:00 GMT US NAHB Housing Market Index FEB 8 8

  • 2/17 18:00 GMT US St. Louis Fed's Bullard Speaks in New York

  • 2/17 18:30 GMT UK Bank of England's Besley to Make Speech

  • 2/17 22:00 GMT US ABC Consumer Confidence 15-Feb -53 -53