The markets were in a risk-off mood due to broad weakness in equities, which arose from worsening expectations for global growth.
Investors fled to the safe-haven Japanese currency, pushing it to its highest level in sixteen months versus the US dollar, while the Japanese 10-year government bond plunged below zero for the first time. The dollar traded below 115 yen before jumping above this level on some upbeat US jobs data. The latest JOLTS report (Job Openings and Labor Turnover Survey) showed that in December, there were 5.607 million job openings, the second highest ever. This was more than the expectation for 5.41 million.
The euro, which saw weakness against the dollar early in Asia, managed to bounce higher in Europe to come close to the $1.13 level. However the single currency may come under pressure as chances increase over further stimulus by the ECB at its March meeting.
One factor buoying the euro today was the narrowing yield spread between the US and Eurozone 2-year notes. This is mostly due to falling Fed rate hike expectations. Some analysts don’t even expect any rate increases in 2016.
The market’s attention will be on Fed Chair Janet Yellen’s testimony in front of Congress on Wednesday. Investors hope to get some insight into where the US economy is heading and what the Fed will do.
In terms of data today, the UK trade balance narrowed in December to GBP9.9 billion from a revised GBP11.5 billion in November. The data briefly lifted sterling against the dollar but the pair remained below the key $1.45 mark today.
Risk aversion helped gold remain close to an eight-month high as the precious metal benefited from its perception among investors as a safe haven asset. On Monday gold peaked above the key $1200 level but it retreated slightly today towards $1190.
Oil prices fell today on concerns of easing demand due to slowing global growth. US oil fell below $30 a barrel.
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