Germany's move to place a ban on the naked short selling of government bonds, credit default swaps as well as its top ten financial stocks has helped to propel the Euro to fresh four year lows in Asia today. The earlier move by Germany seemed drastic and had many investors scratching their heads in bewilderment over what seemed like a move that further fractionalized the Euro Zone and once again called into question the credibility of EU leadership. Simply put, this announced regulation limits the vehicles you could use to short Europe; however, it sends more investors toward the Euro to carry out that task. Chances are that other EU nations may now be forced to follow suite with similar regulations.

The EUR/USD dipped to a 1.2142 session, as well as four year low midday in Asia, but was able to climb to 1.2220 highs as the day wore down. EUR/JPY was dumped to 111.25 levels as risk took a tumble along with the Euro. EUR/CHF was the anomaly, with the pair supported once again by a supposed SNB bid at the 1.4003 level. Overall, the yen and dollar enjoyed a day of sharp gains once again to the detriment of the European currency. Elsewhere, across the pond, GBP/USD dropped to six week lows near 1.4235 and the GBP/JPY fell to 130.35 to complete an over four big figure slide in the past 24 hours.

In Australia, as consumer sentiment fell to its lowest level since late 2009, so did the Australian currency. The AUD/USD slipped from 0.8635 to lows near the 0.8515 ballpark. AUD/JPY shed about 150 pips to 78.00 lows on the day. Commodity based currencies were damaged by the view that strict austerity measures in the Euro Zone could hamper growth and slow the global recovery. USD/CAD pushed higher by almost 70 pips to 1.0445 and the NZD/USD the same amount to 0.6830 lows. Spot gold, XAU/USD lost its shimmer and retreated almost $22 to lows at the $1206.00 mark, a level that looks to continue to be solid support for the precious metal.

Heading into the London session be on the lookout for the possibility that other EU nations may in fact join the regulation game begun by Germany, and if so risk will remain scarce and the Euro will remain fragile.

Upcoming Economic Data Releases (London Session) prior expected

5/19/2010

7:00

GE

Merkel Addresses German Parliament on Euro-Region Bailout

19-May

 
 

5/19/2010

8:30

UK

Bank of England Minutes

19-May

 
 

5/19/2010

9:00

GE

Parliament's Budget Group Open Hearing on Euro Stability Fund

19-May

 
 

5/19/2010

9:00

EC

Construction Output SA MoM

MAR

-3.30%

- -

5/19/2010

9:00

EC

Construction Output WDA YoY

MAR

-15.20%

- -