Tuesday morning saw another bout of extreme volatility this morning, a good bit of it before New York joined the fray but even after the New York open it was no picnic. EUR/USD surged after a firmer ifo survey but soon reversed course and fell back to the 1.3100 handle. A heavy dose of EUR/JPY selling just as poor consumer confidence data hit the tapes, along with a decline in home prices, sent EUR/USD to its session low at 1.3120 and USD/JPY down to 88.45.
US equities traded firm today while commodities headed in the opposite direction. Oil failed to overcome $50 and eneded up sliding 9% on the day. Gold edged back below the $ 900 level and the Treasury held a very successful 2-year note auction which helped calm funding jitters in a substantial way. US 10-year notes fell more than 10 bp to 2.53%.
The dollar appears caught between two stools with risk aversion still pervasive owing to the gloomy economic outlook but some flashes of life seen in the equity markets as they look down the road past the current despair. The market is having trouble deciding which camp to join, a healthy situation in the near-term as it should keep markets from becoming too one-sided but a trying situation as which ever view you choose, your patience will be tried again and again.
Trying the patience of stock bulls was news late in the session that Moody’s may downgrade General Electrics AAA rating. EUR/USD ends the US session at 1.3175, USD/JPY at 88.91 and cable at 1.4145.