- Fears of nationalization of Citi and Bank of America roil markets early
- Senate Banking Committee chair Dodd fuels fears, says nationalization “may happen”
- White House downplays nationalization fears; says Obama favors private banking system
- BofA CEO: No reason bank should be nationalized
- US CPI rises 0.3%, core up 0.2% in January
- Austria’s Nowotny: Zero rates neither necessary nor desirable in eurozone.
- ECB’s Papademos: Important for central bank policy to “lean against the wind”
- Gold crosses $1000 threshold on bank fears; ends at $992
- Dow closes at lowest levels since 2002; S&P still holding November lows, closes down 1.1% at 770
Markets were quite volatile on Friday as risk aversion ran high during the early US session. That manifested itself in EUR/USD sales as it typically does but EUR/USD met good buying interest at the 1.2560. USD/JPY resumed its rally after overnight profit-taking and reached 94.38 before stalling.
Then things began to unravel, and quick. Dodd’s comments on nationalization turned the fears of a theoretical risk it fears of an imminent move by the government to seize two of the nations largest banks. Traders scrambled to square positions across the board and seek the safety of the sidelines. China was a very aggressive buyer of EUR/US as the market began to rise, further squeezing a very short market. Medium-term players began to cover as well after a second consecutive bounce from the 1.25 handle. Prices reached 1.2880/85 before the rally relented.
USD/JPY saw wave after wave of profit-taking as important supports all the way down to 92.80/90 were obliterated in just a few minutes time. Hopes for a topside breakout faded dramatically as 94.50/65 is now looking like a potential double-top on the charts. 92.54 was the spike low before a recovery to 93.20 late in the day.
