Financial Markets Recover on Plans From the Fed

The Usd experienced further losses after a volatile day of trading. The EurUsd rose over 100 pips following yesterday's close to 1.4466, additionally the UsdJpy picked up major gains to the mid 107 level. the GbpUsd traded higher to 1.8318 based on further developments regarding the Fed's bailout plan. Commodities were higher across the board with oil at 104 up nearly 6%, and gold followed suit upward at 873. Treasury yields were substantially wider, with the 2yr up 47 bps and the 10yr higher by 27 bps, these moves were largely due to the decreased risk aversion in the markets.

German PPI decreased to -0.6% vs. -0.5% expected, which is in sync with the theory that price pressures are easing based on lower demand. This may give the ECB further leverage to maintain rates in the near-term, considering growth does not make any significant moves to the downside before year-end. There was limited data out of the UK, home price info is scheduled to be released next monday, which is likely to be negative.

The central story in the financial markets revolved mostly around the Fed's plan to rescue banks. Apparently the Fed will establish an $800bln fund for illiquid assets, and $200bln to insure money market funds. The market reacted very strongly on the equity side with the Dow up over 300 pts, but commodities seem to remain a safe haven for assets. With oil above $100, it will be difficult for the Usd to really pick any meaningful momentum in the near-term.

AC Markets
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