Euro sees rough start as risk aversion explodes

Japanese yen – Rising risk aversion sent the Japanese yen climbing across the currency universe. Currently the yen is weaker against the dollar at ¥81.84 despite having surged from beyond ¥82.00 to ¥81.64 in a moment of panic in Europe. The unit is up by over 1% against the Aussie and has made a gain of 0.75% per euro and is even 0.5% firmer per pound. Domestic data was mixed with May supermarket sales falling 1.3% after rising by 0.3% the month before. A coincident index constructed using March inputs dipped marginally to 103.5 although a leading index intended to forecast conditions six-months ahead rose from 99.5 to 100.1.

British pound – The FT carried a weekend interview with Bank of England Chief Economist Dale Spencer who clarified his call for a tightening of monetary policy. He claims to be unconvinced that the recovery has traction and can be relied on to power the economy forward. But he claims to be even more concerned by the path that inflation is taking. The pound fell against the dollar towards its midweek low touching $1.6109 while benefitting from the weakness of the single currency and rising to 87.03 pence.

Aussie dollar – The Aussie fell off a precipice on Monday with dealers not liking the site of plunging regional equity markets or the prospect of weaker demand from China, which remains its biggest trading partner. The Aussie reached a low in the European trading session at $1.0512 U.S. cents and just ahead of Tuesday’s $1.0506 weakest point. Futures trades pared positions in the Aussie according to Friday’s CFTC data, which showed a net 10,000 fewer bullish positions at 50,919 contracts.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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