Daily market commentary

16, May 2012

Dollar, Yen Continue To Gain As Risk Aversion Spreads.

Risk aversion remains the main theme across the markets this week with equity market continuing to slide and the safe-havens of the US Dollar and Japanese Yen performing strongly. Very positive German GDP yesterday gave the Euro a boost in early trading but again developments in Greece have swamped any positive Euro related news and driven the Euro lower against the Dollar and Sterling.  News of large Euro outflows out of Greece by citizens is not helping the nagging feeling that a Greek exit from the Euro-zone is approaching faster than European politicians would like. They have desperately tried to manage the situation to ensure that if the worst did happen, Greece leaving could be orderly. The fear is now that politicians no longer have the ability to manage the situation and a disorderly exit may now be on the cards.

The Bank of England inflation report is due today at 10.30. We have covered what the Governor is likely to outline, namely lower that expected growth and higher than expected inflation. The market has already built that into Sterling and the news will probably play second fiddle to news coming from the Euro-zone for the rest of the week.

Tonight sees the Federal Reserve minutes released from the last meeting. As ever, any hint or sign that the FOMC are considering further easing will see a sharp reversal from the trend in recent days, equity markets will jump and the USD will sell off from its recent surge right across the board.

Report by Alistair Cotton

 

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