Investors are still worried and anxious over the worsening outlook for the global recovery from deepening debt crisis, a threat to U.S. fiscal stability and slowing global growth.
Stocks are trending lower in Europe after the stress test results were published further undermining the financial stability in the European continent and currencies continued to decline to haven assets amid high uncertainty and perceived inability of European leaders to solve the debt crisis!
Risk aversion is clearly evident in the market with the rally for the franc and gold to new records on intensified fear that the debt crisis is out of hand as euro area leaders prepare to meet in Brussels this Thursday to discuss the area's financial stability with slim hope seen that they can resolve the crisis and restore confidence.
The euro declined heavily versus its major counterparts as the debt crisis remains the main focus, and the stress test results only added to the downbeat sentiment which was already met with resentment from the market for its weakness and from national central banks for its inadequate measures of capital. Eight European lenders of 90 failed the test and need to raise a combined 2.5 billion euros while as many as other 20 banks were at the edge and need to bolster capital as well.
The euro fell to a new record low versus the swiss franc with the start of trading this week, where the EUR/CHF opened with a strong bearish gap at 1.4110 recording the low of 1.4103 and rose now to cover the gap and currently around 1.1480 and still below Friday's closing of 1.1507.
Weakness for the euro spread versus the yen where the EUR/JPY fell to set the low of 110.62 from the early high of 111.84 and also weakened versus sterling to as low as 0.8703 and rebounded higher but still bearishly trading today around 0.8735.
The EUR/USD on the other hand extended the downside trend and started the third consecutive weekly decline to decline to the low of 1.4012 from the early high of 1.4133. The pair is currently trading around 1.4056 and stability below 1.4150-70 will keep the downside potential valid for this week targeting areas around 1.3910.
Amid the pessimism and the euro's weakness the dollar extended the gains despite the prevailing debt debate in the United States as well, where the Congressional leaders have yet found the means to break the deadlock over raising the debt ceiling to avoid rating downgrades.
The euro's weakness prompted the dollar strength further and supported the USDIX to move to the upside reaching the high of 75.66 and currently trading near around 75.53 from the early low of 75.16.
More volatility will be seen today and this week with the fragile sentiment and prevailing jitters as the focus is on the euro area leaders to come up with a comprehensive and suitable solution to overcome the deepening crisis and heal the Greek agony to stop the rising contagion risk!