U.S. Dollar Trading (USD) the devil was in the detail or lack of it yesterday with the weekend announcement of a bailout of for Spanish banks failing to help Spanish bonds during the European session. Investors are concerned about who will pay for the bailout and what the implications are for insurance against default. The downgrade of the biggest Spanish banks by Fitch added to the negativity and we saw selling all through to the end of the US session with EUR/USD down 200 pips from Asian highs. Looking ahead, May Import Prices forecast at -1 vs. -0.5% previously. Also May Export Prices forecast at -0.1% vs. 0.4% previously.
The Euro (EUR) hopes of sustained rally were dashed from the get go in the European session with the sellers gaining the upper hand as negative headlines flooded in on the proposed bailout of Spanish banks. There was even talk late in the US session that if Greece did leave the EU then emergency capital controls may be placed on Eurozone to stop a flight of capital.
The Japanese Yen (JPY) the USD/JPY was dragged lower by the Yen crosses which had major moves lower on the EUR/JPY and AUD/JPY. The USD/JPY has been supported by the lack of change in the US monetary policy when Bernanke failed to put QE3 firmly on the table last week. The BOJ is watching the Yen movement closely and this is also slowing the gains of the safe haven.
The Sterling (GBP) the GBP/USD followed the EUR/USD lower but was able to make headway on the EUR/GBP which fell sharply to 0.8050. The outlook is not good for the cable with market already selling on rallies and the proximity of the EU means any major event will affect the UK directly. Looking ahead, April Industrial Output forecast at 0.1% vs. -0.3% previously
Australian Dollar (AUD) the AUD/USD opened above 1.0000 but like the EUR/USD waited for the European open and when Bond yields failed to respond to the new bailout the Aussie was aggressive sold back to lower 0.9900 levels. The continuation of the selling was seen as US stocks took another leg lower sending the AUD/USD down to 09840. Looking ahead, May Business Confidence previously at 4.
Oil & Gold (XAU) Gold opened above $1600 before falling back to $1580 as USD strength outshined Gold safe haven demand. OIL/USD crashed $4 lower as risk was taken off the table and Saudi officials talked of additional capacity to produce.