The dollar fell to a one-month low below the Y80 level versus the yen in early morning trade with the Japanese currency bought on the back of heightened risk aversion reflecting falls in Asian share prices. The USD was also weighed down by remarks from Fed Chairman Ben Bernanke, the tone of which reinforced market expectations that US interest rates will remain extremely low for some time to come.
Speaking at a conference, Bernanke gave a downbeat assessment of the economy, saying that growth has slowed. At the same time …

The euro hit a one month high against the dollar and sterling late yesterday, supported by a string of weak US data over the course of this week, as well as hawkish comments from the ECB. Markets are nervous that this afternoon’s US non-farm payrolls report for May will be weak, further confirmation that the economic recovery is struggling to hold momentum. Markets had been expecting a rise of around 190,000 but this has now been revised downwards to 150,000 in light of Wednesday’s much weaker than anticipated ADP employment …

The manufacturing activity grew at its slowest pace in 20 months in May, and weaker export and consumer demand led to the first drop in new orders in two years, fuelling fears about the pace of the recovery.
The CIPS manufacturing PMI headline index, published on Wednesday, fell to 52.1 last month from a downwardly revised 54.4 in April, well below the 54.1 consensus forecast. The worst headline reading since September 2009 was blamed on a weaker domestic market, particularly for consumer goods, and the slowest growth in export orders in …

Optimism that Greece will receive a new aid package and be able to avoid a debt restructuring has seen further euro gains, though media reports that the IMF will not make its next payment saw the euro under some pressure at the open today. Yesterday’s release of the flash May HICP also provided some euro support. While the annual inflation rate edged lower it remains well above the ECB’s target level reinforcing expectations for an interest rate hike, most likely in July. Greece is likely to continue to dominate euro …

The dollar fell sharply versus a host of currencies late yesterday and overnight, pressured by a drop in US 10 year bond yields to six month lows on the back of a string of disappointing US data. A wave of stop-loss selling, as well as reports of selling by Asian sovereigns, exaggerated the moves in the USD. The drop in the dollar has pushed the euro back above the $1.42 level, with the single currency getting a respite from worries over the possibility of debt restructuring in Greece. The dollar …

There was a bounce in the euro yesterday and overnight on talk of the possibility of China stepping up its European bond purchases, as well as easing risk aversion on the back of a rise in Asian share prices. The talk on China was fuelled by newspaper story from a professor at the People’s Bank of China that the country should expand its purchases of euro zone sovereign debt and should increase direct investment into Europe. Meanwhile, speculation of a rate hike by the ECB was reignited by remarks by …

Monday was all about the re-pricing of risk. That’s not such a bad thing given that there were signs that markets were getting complacent once again. The VIX measure of equity market volatility is perhaps the best measure of this, in light of its liquidity. This was nudging below the 15.0 level towards the end of last month, a level that has not been seen on a sustained basis since the late 2006 and the early part of 2007 (and less than 0.5% of the time since September 2008). We …