By Ilya Spivak, Currency Strategist

Talking Points
  • US Dollar Soars as Markets Rethink Berlusconi Resignation Rally
  • S&P 500 Futures Sink, Pointing to Continued Risk Aversion Ahead
  • Ben Bernanke Speech Unlikely to Offer Insight on Policy Outlook

The boost to risk appetite following news that Italian Prime Minister Silvio Berlusconi will step down after next week’s austerity vote proved fleeting, with S&P 500 futures sliding and the safe-haven US Dollar trading higher against most of its leading counterparts. As we discussed in detail yesterday , traders were most concerned with the ability of any government – whether it be that of Berlusconi or otherwise – to be meaningfully effective at pushing through deficit-reduction measures to avoid a meltdown in Euro Zone’s third-largest economy as it prepares to roll over €14.9 billion in debt this month. As such, traders initially welcomed the Prime Minister’s resignation announcement because budget cuts would be passed before a government reshuffle .

Sovereign risk was quick to creep back into the markets however, and that is not altogether surprising. Passing austerity measures is not the panacea, with Greece as a case in point. The prospect of early elections – complete with inter-party squabbling and feverish coalition-building – as opposed to the installation of a competent technocrat care-taker government hardly seem s like something that ought to have reassure d the markets . Budget cuts need to be implemented after being passed, and slashing fiscal largesse is all the more difficult when politicians are trying to vie for votes. On balance, t his keeps alive fears that the worst-case scenario for the Euro Zoned debt crisis – a meltdown in a country too big to be bailed out with currently available resources – remains a credible near-term possibility.

The European economic calendar is relatively quiet, with traders looking ahead to a speech from Federal Reserve Chairman Ben Bernanke as the next major bit of scheduled event risk. L ast week’s disappointing ISM manufacturing - and service-sector figures as well as a dovish FOMC outcome rekindled QE3 expectations , with investors now on the lookout for any signs of an emerging consensus favoring further stimulus . With that in mind, Bernanke is scheduled to give welcoming remarks at a conference on “Small Business and Entrepreneurship” with no Q&A to follow, so the possibility that any meaningful policy clues will emerge out of the ordeal seems minimal. US stock index futures are extending losses while the spread between Italian and German 10-year yields as well as periphery Euro Zone CDS rates are pushing higher, pointing to continued risk aversion ahead that stokes the greenback against its sentiment-linked counterparts .

Related : Australian, NZ Dollars Lower After Softer Chinese CPI

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

NZ Card Spending - Retail (MoM) (OCT)

1.5%

0.7%

0.7% (R+)

21:45

NZD

NZ Card Spending (MoM) (OCT)

1.8%

0.6%

0.4% (R+)

23:00

NZD

QV House Prices (YoY) (OCT)

1.2%

-

0.7%

23:30

AUD

Westpac Consumer Confidence (NOV)

6.3%

-

0.4%

23:30

AUD

Westpac Consumer Confidence Index (NOV)

103.4

-

97.2

23:50

JPY

Bank Lending Banks ex-Trust (OCT)

0.1%

-0.2%

-0.3%

23:50

JPY

Bank Lending incl Trusts (YoY) (OCT)

0.0%

-0.1%

-0.3%

23:50

JPY

Current Account Total (¥) (SEP)

1584.8B

1452.2B

407.5B

23:50

JPY

Adjusted Current Account Total (¥) (SEP)

1186.6B

963.2B

652.6B

23:50

JPY

Current Account Balance (YoY) (SEP)

-21.40%

-31.3%

-64.3%

23:50

JPY

Trade Balance - BOP Basis (¥) (SEP)

373.2B

351.7B

-694.7B

0:01

GBP

BRC Shop Price Index (YoY) (OCT)

2.1%

-

2.7%

0:30

AUD

Home Loans (SEP)

2.2%

1.5%

1.2%

0:30

AUD

Investment Lending (SEP)

1.9%

-

1.8%

0:30

AUD

Value of Loans (MoM) (SEP)

0.7%

-

0.6%

1:30

CNY

Consumer Price Index (YoY) (OCT)

5.5%

5.5%

6.1%

1:30

CNY

Producer Price Index (YoY) (OCT)

5.0%

5.8%

6.5%

4:30

JPY

Bankruptcies (YoY) (OCT)

-14.1%

-

-9.2%

5:00

JPY

Eco Watchers Survey: Current (OCT)

45.9

46.5

45.3

5:00

JPY

Eco Watchers Survey: Outlook (OCT)

45.9

-

46.4

5:30

CNY

Retail Sales YTD (YoY) (OCT)

17.0%

17.0%

17.0%

5:30

CNY

Retail Sales (YoY) (OCT)

17.2%

17.6%

17.7%

5:38

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (OCT)

24.9%

24.7%

24.9%

5:49

CNY

Industrial Production YTD (YoY) (OCT)

14.1%

14.0%

14.2%

5:49

CNY

Industrial Production (YoY) (OCT)

13.2%

13.4%

13.8%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:30

EUR

Bank of France Business Sentiment (OCT)

96

97

Low

7:45

EUR

French Central Gov Balance (€) (SEP)

-101.0B

-102.8B

Low

7:45

EUR

French Survey of Industrial Investments

-

-

Low

9:30

GBP

Visible Trade Balance (£) (SEP)

-8000

-7768

Medium

9:30

GBP

Trade Balance Non EU (£) (SEP)

-4950

-4867

Low

9:30

GBP

Total Trade Balance (£) (SEP)

-2100

-1877

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3558

1.3879

GBPUSD

1.5895

1.6135

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

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DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2011/11/09/FOREX_US_Dollar_Soars_as_Berlusconi_Resignation_Rally_Unravels.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.