Markets are adding risk back into their portfolio on relief that China’s economic data releases were not as bad as the whisper but also on the hope that they were bad enough to increase both monetary and fiscal stimulus. Moody’s downgrade of Italy from A3 to Baa2, outlook negative, has had limited market impact. In this environment, risk assets like equities and commodities are strong; while the stronger sovereign bond yields and the USD are weak. Outperforming are the commodity currencies, with AUD, NZD and CAD all up between 0.3% and 0.5%; while CNY is underperforming, down 0.1%. EUR, SEK and JPY are flat.
EURUSD (1.2249) The euro remains weak but at the end of the trading day on Friday as investors sentiment turned more positive, trades bought euros. The euro was trading at 1.2156 mid day, and it was a good long term buy. Yesterday to prime brokers revised their annual forecast for the euro up to 1.40 range adding incentives to purchase cheap euros.
The Great British Pound
GBPUSD (1.5576) there was no technical or fundamental support for the pound on Friday but market sentiment came into play pushing up all currencies and commodities as investors sentiment lightened. The annoucment of the new joint program between the Finance Ministry and the BoE also helped bouy sentiment. The pair are trading at 1.5576
Asian –Pacific Currency
USDJPY (79.19) the dollar was strong most of the day on Friday, until investors feeling a bit more cocky moved to more risk, dropping the DX index which had been as high as 84, and moved to commodities and higher risk assets. The USD dipped against the JPY
Gold (1589.05) was a major benefactor of the overall elation of the markets, as investors cheered unexpected high earning from JPMorgan Chase, US markets skyrocketed taking along traders, who moved to gold and other commodities.
Crude Oil (87.01) Crude went along for the commodities ride on Friday adding over 1.00 in trade. Even after the EIA revised global consumption downward. After the release of Chinese GDP and production data, markets seemed to enjoy a day of relief and pushed commodities upwards.