Risk Correlated Assets Well Offered on Rallies in European Session

22
May

Euro rallies met with very solid offers above 1.2800
Risk correlated assets back under pressure in European session
Fitch downgrades Japan ratings; Yen sells off
OECD and IMF out with some downbeat global comments
UK inflation softer than expected
Early rally attempts in risk correlated assets on Tuesday were met with solid resistance in the European session. Market participants shrugged off upbeat news that Germany and France would make strong efforts to keep Greece in the EMU, and the reports that Greek banks would receive a Eur18B recapitalization down payment on Friday. Instead, focus remained on a Fitch downgrade to Japan, and downgraded Chinese growth forecasts from the OECD.

Relative performance versus the USD Tuesday (as of 10:45GMT)

CAD -0.10%
GBP -0.42%
AUD -0.43%
JPY -0.50%
CHF -0.53%
EUR -0.55%
AUD -0.59%
The IMF also came out with some downbeat comments, adding to an intense intraday pullback in the Euro from levels above 1.2800 down into the mid-1.2700’s. From here, it will be interesting to see how things play out into North American trade, but with US equity futures already pointing lower, things are not looking pretty. Still, market conditions are quite choppy right now and we continue to recommend staying on the sidelines.

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