Key News
* Fitch: U.K. Most at Risk of AAA Downgrade (WSJ)
* Europe’s industry slams China over currency (WSJ)
* IEA Cuts 2030 Oil Demand Forecast on Economy, Climate Policy (Bloomberg)
* Brussels to rebuke Greece over budget deficit (FT)
The Event Agenda
Morning Run-Down
With the central bank events of last week behind us, the markets jumped back on the “risk taking” theme.
Yesterday, the dollar was under pressure from an IMF report over the weekend. The IMF said within the report that the dollar was “on the strong side.” It also said the euro was “on the strong side” and that emerging market currency strength was causing problems. It later made a direct statement about the undervalued yuan in China, which was the purpose of its statement on currencies. Nonetheless, the markets don’t need much of an excuse to sell dollars, and so they did.
Yesterday’s selling pressure in the dollar left key currencies testing critical lows/highs of this risk rally. The euro neared its post March highs of 1.5063, the dollar index is sitting on the post March lows, and some key emerging market currencies are testing highs against the dollar…Brazil Korea, Thailand… These levels are important to watch. So far, they have held and the dollar is trading on firmer footing today.
Some key developments over night…
Fitch says the country most at risk of a downgrade from AAA is the UK. The pound has been under pressure since, following the unexplainable strength over the past month. Overall the data has been heavily pound negative relative to almost every currency. The UK economy surprisingly shrank last quarter and the BOE is, again, expanding its asset purchase program—big growth and policy differentials, yet the pound has experienced some recent strength.
There are a slew of Fed speakers coming up…
Here’s a look at the charts…
Key Charts
The S&P 500 continues to be contained by the downtrend from October of 2007 highs, though the breakdown of the uptrend from March (the red line) failed yesterday, with prices reversing back toward highs for the year.
The euro 1.5063 prior high is critical for the risk trade. A breakout would likely coincide with a breakout in stocks.
The unemployment rate from Friday reached levels not seen since 1983…Will unemployment at 10% mean the same to consumer confidence as $4 gas? Gas prices reached $4 in June of 2008. As a result, consumer confidence printed its lowest level since 1980. With a bounce back in confidence to 70, look for the number on Friday to disappoint…
The VIX (the fear gauge) after spiking to post Lehman levels has settled back quickly … A sign that conviction is light, but complacency is dangerously heavy.
Related posts:
- Morning Run … November 17, 2009 Key News * International Purchases of Long-Term U.S. Assets...
- Morning Run … September 22, 2009 Key News * Fed Effort to Stoke Growth...
- Morning Run … August 17, 2009 Key News * Pound Drops as Home Sellers Lower...
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