Risk off as Portugal's rating cut to junk

The U.S. dollar strengthened across the board with the exception of the Swiss franc as Portugal’s long-term government bond ratings experienced a multi-notch cut to junk and received a negative outlook. Investors sought safety in CHF and USD while the euro was sold on the ratings downgrade which highlighted the ongoing peripheral debt concern and fear of contagion. EUR/USD fell to current levels of around 1.4410 and EUR/CHF dropped to current levels of around 1.2120 as investors dumped euros in favor of the ‘safe-havens’ USD and CHF.

U.S. May factory orders were lower than the forecast of +1.0% with a print of +0.8% from the prior month’s -0.9%. The gain in orders indicates that manufacturing is showing signs of recovering following the disruption related to Japanese natural disasters.

U.S. equities were choppy as they tumbled towards session lows following news of the Portugal downgrade before briefly rebounding back into positive territory. The Dow Jones Industrial Average finished the day slightly lower by around -0.10% and the S&P 500 closed out the session down by about -0.13%. Commodities were firmer with oil gaining around +2.06% while gold rose by roughly +1.28%. Silver outperformed as it climbed by nearly +4.22%. U.S. 10-year Treasury yields shed about 5 basis points to around 3.12% amid a flight to quality as debt concerns intensified in the EU periphery.

On the data front for the upcoming Asia/Pacific session is Japan’s May preliminary coincident and leading index and a speech by New Zealand Prime Minister Key.

Source: Forex.com

05.07.2011