A volatile trading day to start the week. Early during the US trading session news came out of the ECB regarding the debt problems certain countries are facing. We saw the EUR/USD start out around the 1.4425 area to open the trading week and hit lows of almost 1.4150 throughout the day.
The big mover of the US dollar today, strengthening the currency, was the news from Standard and Poor’s regarding the outlook on the credit rating of the US Government. What they mentioned was that US policy makers may not be able to get to an agreement on long term budget issues as quickly as they think, and in the short term there will be difficult fiscal challenges. This triggered a drop in equity markets and in most commodities other than gold. The Dow Jones Industrial dropped 1.14%, the S&P 500 dropped 1.1% and crude oil fell to $107. In effect, the risk aversion trade was on and the dollar saw strength in the session.