Relief trade may be running out of puff
Signs emerged on Friday that the Greek relief trade that had supported risk appetite in previous days was already running out of puff. S&P's warning that Italy's deficit reduction plan contained significant delivery risk, especially their claims regarding the combat of tax evasion, soured the euro's mood and encouraged some traders to retreat to the sidelines. Commodities went into reverse as well, with Brent crude back under $110 at one stage. Of particular interest recently is the sluggishness of the gold price, which fell back to $1,485 an ounce on Friday. Two weeks ago, the gold price was above $1,550. Indeed, the adverse price action in gold coincides with the heaviness of that other safe haven, the Swiss franc. The question is whether this softness in the traditional safe havens is just temporary, perhaps reflecting some profit-taking, or more permanent? The weakness is all the more intriguing given the enormity of still unresolved issues such as the European sovereign debt crisis and the US debt ceiling. July promises to be another interesting month for asset markets, especially currencies. |
