Overall, the market managed to post the first gains against the dollar this week. The currency market was helped by the U.S. futures, which rose slightly above the break-even line. However, the real test comes soon after the London open, when the calendar is loaded with releases coming from the U.K.
The Euro (Eur/Usd) gained 80 pips tonight, after the pair tumbled in the last two days of trading nearly 500 pips, reaching a one-month low. Some say the European Central Bank is lagging behind the economy, which is reflected in the euro's decline. In addition, traders sold the pair in the last two days as the market was driven by risk aversion.
The Pound (Gbp/Usd) fell for a second day, 500 pips, reaching the lowest value since June 2001. The pair tumbles, because the U.K. financial system has big troubles, sending the country into a deep recession. In the Asian session, the pound rose 80 pips.
The Aussie (Aud/Usd) reached the lowest value in the last month of trading, as the pair followed the general direction of the market. In the Asian session, the aussie gained 70 pips and tried to break above the intra-day channel that holds for two days.
The consumer sentiment indicator for Australia fell to -2.2 percent from last month's 7.5 percent reading. For the full year to January, the index was a -12.8 percent, seasonally adjusted. This decline has erased some of the 12.1 percent jump seen in the sentiment through the November and December period. It also suggests that initial gains due to the interest rate cuts and stimulus packages are beginning to wane.
The Cad (Usd/Cad) declined, compared with the dollar for another day. The cad gained 120 pips, after the Bank of Canada reduced the monetary stance by 50 basis points, to 1%, as expected. Going forward, the pair has two strong resistances in the 1.28 and the 1.30 areas. In the Asian session, the cad fell 30 pips.
The Swissy (Usd/Chf) gained 150 pips yesterday, totaling 360 pips gained in the past two days. The pair broke above the 100-day moving average in the last day of trading, but failed to break above the 50-day moving average too. In the Asian session, the swissy fell 50 pips.
The Yen (Usd/Yen) rose 30 pips in the Asian session. In the last two trading days, the pair was sold lower, as traders saw the market's risk as high. Tomorrow, the Bank of Japan is expected to announce its new monetary stance
Financial Shares Are Back In The Spotlight, Dragging The Market Lower
Asian trade: Asian shares declined for a second day following the momentum from the U.S. markets. The Financial shares led the declines in the two markets.
It looks like the recent actions taken by the U.K. government brought attention back to investors of the precarious situation of the financial system. Banks' shares took a very strong hit yesterday, because investor assess that authorities have their hands tied. Some investors fear that governments from across the world will try to nationalize banks now, practically shedding away shareholders. The most affected banks were the ones that investors fear the most, as State Street Corp, which plummeted nearly 60%.
A Bloomberg report shows that stocks fell by 14% from Election Day to Inauguration Day, the worst performance on record. The second-worst performance comes from 1933, when Roosevelt was elected president. However, back then, the market rallied 75% in the next few months.
Tonight, the Nikkei fell 155.94 points (1.93%) to 7,909.80. The Australian S&P/Asx lost 35.30 points (1.02%) to 3,441.30. The S&P tumbled tonight 44.90 points (5.28%) to 805.22, while the Dow Jones fell 332.13 points (4.01%) to 7,949.09.
Crude oil rose very strongly yesterday, after it made a new low. Crude oil for February delivery gained $0.40 to $41.20.
Gold declined a little in the Asian session. Bullion for immediate delivery lost $3.40 to $851.80.
Previous Wall Street trade: At the close of floor trading on the NYSE, the DOW was on 7949.09 after falling 332.13 points (-4.01%) while the S&P finished on 806.22, down 44.90 points (-5.28%). it was the worst performance for the DOW on an inauguration day in history. The NASDAQ was the biggest percentage loser for the day, closing on 1440.86 with a loss of 88.47 points (-5.78%). Bonds were sold early in the day but were bought as stocks plunged after Mr. Obama's speech. The yield on the 2-year note fell 2.8 basis points to 0.700% while yield on the benchmark 10-year note fell 5.1 basis points to 2.370%. The dollar traded in risk aversion mode, gaining 1.39% on the euro, 3.61% on the pound and 2.94% against Australia's currency as it fell 0.98% to the yen.
Previous European trade: In Europe, the U.K. Ftse fell 17.07 points (-0.42%) to 4,091.40, while the German Dax fell 76.29 points (-1.77%) to 4,325.47