Risk aversion? Check! Stronger than expected U.S. data? Check! The Greenback got it all going yesterday as it chalked up gains against its major counterparts. EUR/USD closed 18 pips below the 1.4200 handle while GBP/USD edged closer to the 1.6100 level. The only currency that outpaced the Greenback yesterday was the Japanese yen, leaving USD/JPY to close at 76.83.
Another tough day for the markets, eh? After a day of recovering from some of its losses, higher-yielding assets took another plunge with U.S. equities tanking by almost 5%. Meanwhile, gold prices soared to yet another new record high as it brushed past the $1,800/ounce mark.
This time around, concerns about the worsening euro zone debt crisis kept risk-taking at bay. On top of that, investors feared a repeat of the 2008 recession, which forced them to liquidate their riskier holdings. Perhaps traders were still reeling from the extremely dovish Fed statement, which confirmed that economic activity in the U.S. isn’t as good as expected.
Still, the U.S. managed to churn out a better than expected Federal budget balance yesterday. The actual figure showed a $129.4 billion budget deficit, smaller than the predicted $137.4 billion shortfall but still much wider than the previous month’s $43.1 billion deficit.
Today, Uncle Sam is set to release its trade balance report and jobless claims data at 12:30 pm GMT. The trade balance is expected to show a $47.9 billion deficit for June, a tad better than the $50.2 billion shortfall seen last May. Unemployment claims are expected to land at 401K for the previous week, a notch higher than the 400K figure posted the other week.