The US dollar has broken down strong resistant points against the euro and British pound, and looks set to accelerate gains, as investors appear to be panic-buying safe haven assets ahead of a massive week of event risk.
The euro started its plunge towards two-month lows versus its US rival, triggered by renewed fears that Greece is losing its battle to stay in the shared currency area, and before the European Central Bank announces its latest interest rate decision. However, an unmistakably risk-averse mood that is weighing on currency markets is very likely the effect of uncertainty ahead of the crucial US presidential elections. Investors are eager to learn which President will run the race towards January’s US “fiscal-cliff”.
News from China, as well as interest rate decision in Australia could create big waves for commodity-linked currencies such as the Australian and Canadian dollars.
Sterling
The pound could make a weary start with investors anticipating UK services PMI survey to show that business activity on the ground still remains rather shaky, despite the British economy emerging from recession in the third quarter. However, sterling may just hang on to one-month highs against the euro, and put up some resistance against other units, with the majority in the market likely to be concentrating on US elections.
US dollar
The latest polls have Barack Obama and Mitt Romney almost tied, and concerned investors are desperate to know who will take hold of the economy before the run towards January’s daunting “fiscal-cliff”. The US must tackle its debt mountain immediately after the elections, or risk automatic triggers in January potentially sending the world’s biggest economy into recession.
Euro
The euro has already extended decline against the US dollar, and is fast approaching two-month lows as Greece prepares to vote on another package of austerity measures. Investors are worried that Athens will fail to agree on improved spending cuts that are needed before the nation’s lenders release any more bailout money.
Japanese yen
The yen’s chances of staging a recovery seem doubtful before the release of Japan’s third quarter GDP figures on Sunday (November 11). The yen plunged to six-month lows versus the US dollar, and is trading at similar troughs against the pound, after central bankers launched another 11 trillion yen of asset purchases to revive the Japanese economy and fight deflation.