Forex: Yen Gains, Commodity Dollars Fall as US Budget Impasse Festers

Talking Points

Yen Gains, Commodity Dollars Fall Amid Lingering US Budget Impasse
S&P 500 Futures Trading Lower, Hinting Risk Aversion Will Continue
Markets Highly Sensitive to Headline Risk, Vulnerable to Sharp Reversals

The Japanese Yen outperformed on the back of haven-seeking capital inflows overnight, rising against all of its major counterparts as Asian stocks declined. The sentiment-sensitive Australian, Canadian and New Zealand Dollars traded weakest on the session. The MSCI Asia Pacific regional benchmark equity index fell 0.9 percent as the deadlock over US budget policy continued to drive worries about the implications of significant fiscal retrenchment in the world’s largest economy on global growthoverall.

The economic calendar is relatively quiet in European and US trading hours, hinting the debacle in Washington DC is likely to remain at center stage for now. S&P 500 futures are pointing sharply lower, arguing for continued risk aversion in the hours ahead. The situation is highly fluid however, meaning an unexpected headline pointing to some kind of breakthrough in Congressional negotiations may quickly change the sentiment landscape, prompting reversals across the financial markets.

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