Volatility to Persist Within the Financial Markets

Financial Markets continue their run of volatility this week after the ECB raied their interest rates on Thursday in an attempt to fight the increasing inflation problem.

By: Forex Mansion on April 8 11 6:54 EDT ForexMansion.com

After ECB raised their interest rates on Thursday as expected, markets embraced the decision with calm as the decision was fully priced. But upon Trichet’s press conference, markets started gaining energy, and moved in different directions.

After President Trichet confirmed the ECB will continue to monitor inflation, investors considered the ECB will remain hawkish towards any inflation although Trichet did not signal any additional rate increases.

The euro gained against the dollar dragging the pound with it although BoE kept its interest rates unchanged yesterday as expected and did not signal any rate hikes. The euro rose today to its highest since January 2010 at 1.4421.

Although the credit crisis in Europe persist, after Portugal admitted she need financial aid, eye now are turning to Spain. Yet optimists believe Portugal may be the last European nation to need bailout.

Although markets will be lacking major international economic data today, the commodity markets remain firm. Gold recorded new record highs today on concerns about the rising inflation, to reach the highest at 1470.41 dollars per ounce, dragging the AUD with it to record territory today.

As the dollar index has been falling in the past few days, and the expanding European crisis persists, demand for safe heaven rose. Silver rose to the highest in 31 years surpassing the 40 dollars level to the highest of 40.23 dollars per ounce.

Crude oil also rose to its highest in 30 months above the 111 dollar level, while Brent surpassed the 124 level for the first time since 2008. Crude is mainly affected by the unrest that persists in Libya and the Middle East, which may affect supplies.

Meanwhile the rising fears over a possible US government shutdown if no agreement on its budget will be reached soon, the dollar index continued to fall recording the lowest at 75.09, giving space for the commodities to expand their gains.

Originally posted here

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