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11/30/2008 - Markets are given a reprieve, for now

Posted by FOREX.com's Weekly Strategy in November 28th 2008  
* Markets are given a reprieve, for now
* Central Bank rate decisions: RBA, RBNZ, BOE, and ECB

Financial markets were thrown a lifeline when the Fed stepped in to guarantee troubled assets of a major US bank and initiated yet another lending facility to stimulate business and consumer lending. Promises of additional fiscal stimulus from the incoming Obama administration added further fuel to the rally, and global stock markets rebounded in major fashion, erasing the devastating losses of the prior week. Risk appetites recovered in tandem and this saw the USD sold off and the JPY-crosses rally strongly. By the end of the week stocks had maintained their gains, but the JPY-crosses had surrendered nearly all of the gains for the week, leaving the outlook for risk appetites highly uncertain. It seems that without recurring government initiatives, markets are unable to sustain rallies, which is to be expected given the unfolding global recession. Adding to the confused sentiment, Friday's strong recovery in the USD was driven by month-end USD fixing demand from asset managers as well as increases in inter-bank lending rates, which saw USD LIBOR rise above the Fed's target rate for the first time in a month. While most likely due to month-end distortions, the USD recovery and the deterioration in credit market conditions suggests we still have a long way to go before sentiment is stabilized.  Full text »

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Filed under: Weekly Strategy