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18/05-12   -   Press releases

Spanish bank downgrade weighs on overnight trading

This morning, the pressure on financial markets has continued after ratings agencies sliced through the ratings of several Spanish banks. The Asian session saw more heavy selling as did the late evening US session. European stock markets are set for another bumpy open. After months, years of putting off the inevitable, it now seems that markets and political leaders are having to face the reality of a Greek euro exit. While we may not be past the event horizon yet, it is far too close to comfort.

The dollar index has resumed its upwards bias, but without its previous trajectory. The standout fallers are the higher yielding currencies of the Australian and New Zealand dollars. The NZD/ USD is continuing its specular slump since April with the pair down 1.16%. The AUD/ JPY and AUD/ USD are both down around 0.95%.

The euro itself is trading lower, though some way off the selling experience by the New Zealand dollar. The EUR/USD and EUR/JPY are down around 0.23%.

The British pound is also falling by a similar margin. The GBP/USD has fallen spectacularly throughout May, with the sell off accelerating in the last two days following the Bank of England´s downgrade of its UK growth forecasts.

Gold is falling back slightly after yesterday´s big rally.

The Faceboook IPO could provide a much needed shot in the arm for world markets if it comes in above estimates. However, there could be an opposite effect if it plunges on its launch day. This morning we have the G8 meeting running all day. At 13.30 we have Canadian CPI with a slight drop expected.

While the US dollar index is looking like it might be running too hot, the Japanese yen may have further space to run as investors seek out safe havens. This could extend the downside on high trending pairs such as the AUD/JPY.

A good way to play this might be a LOWER trade on predicting that the AUD/JPY trades closes below 77.50 in 3 days time for a potential return of 159%.

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