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Survived the Weekend!
By Mike Conlon | December 14, 2009
Last Friday the markets seemed a bit “nervous” as recent negative news around the globe has been trickling out. Going into year end, traders are more cautious over the weekend as there are any number of potential land mines out there that could derail world economic stability. Let’s examine a few:
Problems with the Euro. We covered this one last week but its going to be interesting to see what happens to the PIGS (Portugal, Ireland/Italy, Greece, Spain). If any of these countries comes any closer to sovereign debt default it could be a MAJOR problem. As a result, there are growing short positions in the Euro.
Reduced oil demand. Because economies are not improving as rapidly, oil demand is off and oil prices are coming down a bit, with oil trading at around $69/barrel. This is also due to recent dollar strength, which is also causing a pullback in gold prices as well. As a result, so far this morning the Canadian dollar (CAD) is down across the board.
Yen moving back to become the funding currency of choice for the carry trade. Yen strength may reverse if there are any signs that the Fed may change their language at this weeks FOMC meeting.
Other than that, there’s nothing major happening today. The yen is strong as Japan continues to battle deflation and there is no threat of a rate hike anytime soon. So today seems like sideways action, perhaps waiting for Wednesday’s meeting.
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