- Trichet: Worst over for Europe but still in a downturn
- Estimates for term refi auction on Wednesday range from EUR 300 bln to as high as EUR 1 trln
- Latvia in much worse shape than when package was arranged: IMF economist
- Belarus widens FX trading bands
- Mortgage Bankers Association; Rising rates hurting mortgage demand, housing
- White House sees 10% unemployment rate in next few months
- Canada’s Flaherty: Size of US deficits a matter of concern over time because of pressures on interest rates.
- Copper slides 5.5%, oil 3.75%, CRB 2.7%
- S&P 500 closes below 900, down 3%, on its lows for the day.
The reflation trade was unwound heavily in New York trade, extending the move begun overnight, on concerns that China will scale back its commodities stockpiling. The lowered World Bank global economic growth forecast hit at a vulnerable point as a result. So did concerns over mounting German debt sales going forward.
EUR/USD fell to 1.3826 before rebounding smartly. Talk of buying from the BIS was heard and there was solid demand from a variety of players which helped spark a sharp short-covering rally to 1.3902 at mid-morning in New York. Dips thereafter were limited to the 1.3840 region.
AUD and CAD were offloaded heavily today, reflecting fears of dampened demand for commodities if the global economy does not improve soon. With Chinese commodity inventories already massive, traders are concerned that demand has been pulled forward and that speculators are now trapped holding long positions in the riskiest assets: commodities, emerging market equities and currencies.
If those speculators head for the hills en masse, the dollar should be a significant beneficiary.
AUD closed on session lows of 0.7875, USD/CAD at 1.1525, just below 1.1555 highs.
