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 To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com 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
