It seems fanciful to accept that global equity markets had been restrained for a decade for fear that Osama bin Laden might pull off another terror attack somewhere around the globe. The world economy has lived through two recessions since 9/11 while the dossier on Al-Qaeda has been expanded to help us better understand that this hydra-like organization is nothing more than unit after unit of tooled-up religious zealots. The early lift to trading on news of the death of bin Laden seems nothing more than a red herring whose disappearance could quickly and easily reverse sentiment within moments. Already the boost to the Asian dollar’s value is fading.
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U.S. Dollar – A couple of recessions later, a change in the political leadership in the world’s largest economic power and sweeping change of power in the political make-up of North Africa and the Middle East probably have more meaning to the price of oil and the pricing of risk premiums than does the U.S. closure over bin Laden and his efficient burial at sea. Dealers were fast to embrace the dollar after the Sunday night news broke. One investor said that U.S. forces would now be faster to leave Afghanistan leaving it with a reduced budget outlay. Another noted the lower threat to oil supplies. Of course neither event has any bearing on the plight of Colonel Qadaffi in trying to maintain power in Libya, Africa’s foremost oil supplier and most logical reason for the last $10.00 rise in the price of crude oil. The dollar managed to rebound from a low at 72.81 where it traded before the news overnight to as high as 73.29. April proved the worst performance in seven months for the greenback while on an index basis the dollar is at its weakest since July 2008. Later on Monday the April ISM is expected to show a slowing in the pace of manufacturing activity to 59.5 from 61.2.
Euro – As the dollar flexed its muscles over the course of the European morning the single currency lost ground. However, the euro has rebounded on the heels of an unexpected firming in the pace of manufacturing expansion. Currently the unit buys $1.4841. Earlier the Eurozone PMI manufacturing index increased to 58.0 after 57.5 with France and Germany leading the expansion. Data for Italy, however, deteriorated. The euro also rose against the Japanese yen to buy ¥120.83 and rose against the British pound to buy 88.91 pence.