The Usd gained significant strength across the G10, with the exception of yen bringing back the question of whether it is or is not a safe-haven currency. The EurUsd fell over 100pips to the low range of 1.26, while the UsdJpy fell 70pips through 98. The GbpUsd retracted 100pips to finding support at 1.42 trading very consistently with the trend of overall risk aversion. Equity markets fell in the US and Europe with the FTSE and the DAX both weaker by more than 3%. Bond yields were mixed, but it is interesting to note that the 2yr rate has maintained a level above 1% today, while the curve is steep this could be the sign of a very slow recovery. Commodities saw a pullback in the energy and agricultural sectors, oil dropped 4% to $43bbl, while gold added a little less than 1% to $952oz. Regarding activity in Europe, the Eastern bloc remains a key factor in projecting price trends in the Euro.

The EU has expressed its concern regarding the growing instability in Eastern Europe, and a coordinated effort will be needed to resolve the situation. A combined effort by the EBRD (European Bank for Reconstruction and Development), the European Investment Bank, and World Bank have come together to lend 24.5bln Euros to Eastern European financial institutions and businesses. Inflationary data showed a drop in CPI to 1.1%, and a rise in unemployment to 8.2% both of which are in line with estimates. The market cannot seem to break the trend of risk aversion so from an FX perspective the Eur should move in the same direction as equities and commodities (oil). We see support at 1.26 on the Eur, and resistance at 1.2832 over the near-term. In the US, GDP registered its deepest decline in over 26 years at -6.4% triggering some buying in gold and dollar denominated assets. The buying activity ended though early in the trading session as US financial markets began to stabilize. U of Michigan consumer confidence came in slightly better than expected at 56.3 vs. 56.0 providing a bit of relief to bears that there is some resilience in the US economy.