The market started the weak with strong pessimism and risk aversion amid renewed debt woes that sent investors to shun risk and demand the safety of the dollar and the Japanese yen that remained the strongest in the market.
Investors are still worried over the worsening outlook for the debt crisis in Europe and rising odds for Greece to default. The pessimism pressured strong haven demand which forced the market to start the week on a rather bearish gap for major high yielding and risky assets, with the dollar the strongest and the euro the weakest for sure!
Fears that Greece will default intensified with speculation that Germany is preparing itself for the possibility with officials from Merkel's coalition saying they are studying how to shore up German banks in the case of the event, signaling the rising possibility for Greece to be denied the next tranche of loans needed to keep it safe from default.
This sentiment pressured the market and send haven demand soaring on the dollar and the yen in early Asian trading. The market is currently recovering to cover the opening gap where the dollar index started the session at 77.46 compared to the closing on Friday of 77.15, where the index is currently trading around 77.25 from the high recorded today at 77.77.
Fears over Greece are predominant with stocks also pressured in Europe from banking shares as the possibility for Moody's to downgrade the three top French banks is now eminent to the market and that has kept the downside pressure on equities as the losses mount.
The announced measures from Greece to contain the crisis and raise more 2 billion euros to meet the target for the budget this year did little to ease the woes though helped the euro slightly to cover the opening gap.
The euro recovered to trade now around 1.317 from the opening of 1.3585 compared to Friday's closing of 1.3662.
Sterling moved in line with the market sentiment amid the lack of UK data today and ahead of a busy week of fundamentals from the kingdom. The GBP/USD recovered nearly all the opening gap to currently trade around 1.5866 near the intraday high from the opening low of 1.5790; the pair started the day at 1.5832 compared to Friday's closing of 1.5953.
As for the Japanese yen, the gains are still strong for the ailing economy which is suffering the rapid and continuous rally for the currency. The USD/JPY is currently hovering around 76.97 rebounding off early lows of 76.73 and well below the morning high of 77.58 as haven demand remains evident on the yen amid the pessimism and risk aversion.
We still see the losses are to spread across the board for major currencies and the dollar alongside the yen will remain favored for gains for the rest of the day and into the U.S. session as the market adjusted only to cover the opening gap and the selloff will continue with the lack fundamentals today with focus on the risk of default by Greece that will keep pessimism the main sentiment.