Another week has passed, and the sentiment in the financial markets has changed again. In the forex markets, the US dollar fell against other currencies like the Euro, and in the US stock markets, the Dow and S&P 500 had another strong downward spiral Friday.

One of the events that’s got traders talking about and reacting to is next week’s US Federal Open Market Committee (FOMC) meeting. Poor US manufacturing data has led traders to scale back their expectations of a rate hike by the Fed soon, and for next week’s rate-setting meeting, investors are expecting the Fed to keep the benchmark rate at 2%, after seven reductions since September last year. There is now just an 8% chance the Fed will raise rates by 25 basis points on June 25, compared with 22% odds a week ago. The current yield is not particularly appetizing considering that the Euro’s yield is higher, and that the ECB has made its intention clear by signaling they are very likely to raise rates in July.

In forex trading, EUR/USD hit a high of 1.5650 Friday, an expected resistance level, before bouncing down to hover around 1.5600.

Did Stock Traders Freak Out On Freaky Friday?

Traders caused/experienced a mayhem in the stock markets Friday, selling stocks in almost all sectors including financials, transport and technology. The Dow plunged 220 points to close at 11842.12, and was down 4% for the week. It also just so happened that Friday was the Triple Witching day, when futures and options expire in the stock markets, so a lot of adjustment - aka noise - took place.

But then again, people are seeing many reasons to short stocks, whether large or small cap ones. There are the usual (unwelcoming) predictions of further bank writedowns, dividends being slashed etc around the corner, plus, two largest bond insurers MBIA [[mbi]] and Ambac [[abk]] have got their credit ratings downgraded by Moody’s on Friday.

Hang on tight for the rollercoaster ride and keep your stops in place.

Posted in Categories: Eurozone, Forex, Stocks, USA.

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