Fx day commentary – 6 may 2011

The US dollar extended its north-bound run overnight outpacing nearly all major counterparts. It was a decidedly risk-off session which saw the price of crude oil crash below $US100 an ounce and a key barometer of sentiment the S & P 500 fell near to 1.0 percent. The decimation of crude oil is testament to the sort of fear that has infiltrated the market as demand concerns making their mark with geopolitical concerns playing second fiddle. This unwinding of US dollar denominated asset classes puts the greenback in a favorable position for all the wrong reasons. We have jitters resonating through the market ahead of Friday jobs numbers and general recovery fears spurring market participants to snub higher yielder assets.

Meanwhile, this weakness has come at the expense of the Aussie dollar which continues its downward trajectory to overnight lows of 105.36 US cents. This week alone has seen the local unit drop from the dizzy heights of 110 US cents to current levels of 106 US cents to represent a near 4 percent fall.

But the Aussie dollar’s fall pales in significance to that of Silver which has taken a 28% hit this week alone after a series of margin increases from the Chicago Mercantile Exchange induced large scales selling – effectively squeezing weaker hands and hot cash out of the market. This theme of weakness continued to plague metals overnight with Silver now trading below $US35.00 a troy ounce.

For those Euro punters expecting ECB President Jean Claude Trichet to reaffirm his “vigilance” on inflation were met with disappointment overnight. As anticipated the central bank left interest rates steady at 1.25 percent but the post decision press conference was met with disappointed after Trichet’s took a more dovish turn. The Euro subsequently took a major hit from the high US$1.48’s to lows of US$1.4510. At the time of writing the Euro is buying US$1.4545.

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Fx day commentary – 6 may 2011