A comment by Fed Chairman Bernanke has triggered a change in sentiment of global investors. Late yesterday Bernanke announced that the Fed may be interested in buying its own debt. This move helped stabilize the U.S. stock markets and gave traders confidence to pursue more risk in hopes of a higher return. The positive reaction by the markets indicates that investors want to see a more proactive approach from central banks rather than just economic stimulus plans and interest rate cuts. The stock markets have reacted positively to the news. Money is starting to shift toward higher yielding currencies like the Euro, British Pound, Australian Dollar and New Zealand Dollar.

The EUR USD posted a gain today as traders shifted their interest toward higher yielding assets. The move was curtailed, however, as traders await the next interest rate cut by the European Central Bank. Expectations are for the ECB to cut its key interest rate by as much as 50 basis points to 2.75%. Continuing economic weakness in the Euro Zone and low inflation are two reasons why the ECB may be considering a cut greater than 50 basis points.

A bad housing market and a locked up mortgage market are reasons why the Bank of England may be considering an interest rate cut of 1.00% or more. Early in November the BoE cut its rate by 1.50%. This move, however, combined with various economic stimulus packages, has done nothing to improve consumer spending, employment, and mortgage or construction markets. The economy is at a standstill. Nonetheless, traders seem to be giving the Bank of England the benefit of the doubt that aggressive interest rate slashing will trigger a quick recovery.

The Swiss National Bank is not scheduled to meet until December 11, but may decide to cut its rate early in unison with the Bank of England and the European Central Bank on December 4. At this time the Swiss economy is under pressure because weakness in the Euro Zone has spread to the Swiss economy. In addition, Swiss Banks are also under pressure that is being caused by depositors leaving. Look for the Dollar to continue to maintain its safe haven status unless the global community decides to take on more risk exposure.

Lower crude oil and gold are the reasons for the rally in USD CAD today. Despite an increased appetite for risk, commodity markets could not attract any buying support. Traders instead focused on the long side of equities. Falling commodity prices are weakening the Canadian Economy which is the main reason to expect an interest rate cut by the Bank of Canada on December 9.

The Australian Dollar found new buying today as global traders sought more risk from higher yielding assets. Overnight the Reserve Bank of Australia cut interest rates more than expected, but the market seemed to like the news. The aggressive cut by the RBA sent a sign to the market that it is going to do its best to turn around the economy.

The NZD USD spent most of the day down; however, a late session rally in the stock market sent traders scrambling for more exposure to risk. Investors like the higher yields offered in New Zealand, but the weak commodity markets are keeping longs out.

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