eur fundamentals

The impact on the financial markets of China’s $586 billion stimulus plan proved to be short-lived, as the overnight surge in foreign stock markets failed to boost US shares.

Instead, concerns about the impact of the financial crisis on US companies like Goldman Sachs and General Motors weighed on investor sentiment, as Barclays said the credit crunch may drag Goldman to its first quarterly loss since going public while Deutsche Bank said that shares of General Motors Corp. could eventually fall to zero. As a result, the DJIA and S&P 500 ended the day down 0.82 percent and 1.27 percent, respectively, while subsequent flight-to-quality led the greenback higher. This is the same dynamic we’ve seen in the markets for weeks, as evidenced by the dismal US employment data we saw on Friday and its minimal impact on the greenback. Thus, I think it may be more beneficial to keep an eye on risks trends and data from regions like the Euro-zone and UK. Ultimately, the trend for the greenback remains bullish, but the currency could experience sharp pullbacks during times that risky assets, such as equities and commodities, surge.

Related Article: Dollar Congestion Belies High Volatility, Bigger Fundamental Problems


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