YEN benefits From Europe’s Sorry Night

Europe has had a difficult night after a barrage of worrying remarks and rumors surfaced. Consequently, the EURUSD plunged by over 120 pips and currently posts 1.4380 (see hourly charts). The resultant risk aversion caused the Yen to flourish resulting in the EURYEN dropping by almost 150 pips to its present value of 130.80.

The Euro-zone is plagued with serious concerns about the Greek economy which imply that its interest rates will remain on hold for some time. With its trade deficits climbing and credit rates cut, expert consensus is advising that Greece will have considerable difficulties solving these problems no matter what recovery plan it undertakes. New Trichet comments made today emphasized this worry when he stated that Europe faced a ‘major debt problem’ and that there was little option but to hold interest rates at their current level for some time.

As if that was not enough to cope with, there were also serious rumors circulating through the night that the German Chancellor Angela Merkel was on the verge of resigning because of her domestic political problems. Although they were denied later, the Euro had already suffered damage as a consequence.

Attention will now turn to important US economic data releases due out soon which may shed light on the pace of the US Economic recovery. The US CPI figures and the New York Fed’s manufacturing survey are both scheduled for release in the next few hours.