Markets Wait For Stress Test Results

A real jumpy session in the US last night with Standard & Poor’s decision to join Moody’s in
placing the US
long-term sovereign rating on creditwatch negative countered by Ben Bernanke’s
follow-up testimony, within which he played down the probability of the
introduction of a further tranche of monetary stimulus. The Dollar’s value
swung sharply back and forth within a tight range, ending the New York trading day very little changed.
This then gave the Asian market little cause to push the currency around, which
was in fact the case. Europe arrived this
morning with exchange rates having barely shifted from where they had been left
yesterday which, with no European data scheduled, doesn’t bode well for early
volatility. That’s not to say that the session won’t provide some excitement.
At 5.00pm this afternoon, the results from the latest round of European banks’
stress tests are published and traders will await their publication with a high
degree of trepidation. Rumours abound of selective disclosure and poor results
from several of the institutions based in the peripheral countries of the
Eurozone. The reports should include details of sovereign bond holdings which,
in the current climate, could create a fair amount of disquiet over the health
of the banks in question. This in turn will raise doubts over the resilience of
each country’s banking sector to an escalation of the current debt crisis. This
in turn must leave the Euro vulnerable today, even though any results are
unlikely to be released until after most traders have closed their books for
the week.

For
economic data, we will need to await US opening and like yesterday, there is a
raft of top tier numbers scheduled for release. Market analysts are predicting
a stronger outcome across the board which, if borne out, will undoubtedly lead
to a firmer Dollar as we approach the weekend.

Report
by Tim Lewis