MARKET UPDATE: Risk Aversion Takes Hold of Markets

 Risk aversion has come back with a vengeance over the last 10 days driven by a host of concerns that continue to damage market sentiment
 USD and JPY remain the best currency plays against the background of rising risk aversion and both currencies look well supported
 Market concerns have not completely abated, although fears plaguing markets have receded, particularly on the US political front, with Obama’s State of the Union address, Geithner’s testimony on AIG and Bernanke’s reappointment all passing without too much incident
 Euro-sovereign spreads continue to suffer from the ongoing Greek saga whilst the other major fear remains further monetary tightening in China
 Mitul Kotecha, the author of these posts and MD & Head of Global Currency Strategy at Calyon has been on the road recently and cites dominating sentiment seems to be for a “W” shaped double dip recession
 EUR/USD slipped below the psychologically important level of 1.40 this week and is showing no sign of turning around
 PIIGS face ratings downgrades (Portugal, Ireland, Italy, Greece, Spain), which have not helped
 In the UK the S&P have warned that UK banks are no longer among the “most stable and low-risk” in the world, which have played against GBP

These are the salient points kindly contributed by Mitul Kotecha, MD & Head of Global Currency Strategy at Calyon. To view the full discussion, please click here to visit the original post on his website The Econometer