httpvh://www.youtube.com/watch?v=IjxO75GYp1w

Fear ran its shadowy hand over the markets again on Friday as equity markets tumbled globally. Once again it’s a case of a short term boost for the euro after a bailout package followed by a crash. Overnight EURUSD fell to 1.2235, a 4 year low, as Asian markets got their time to react. Unfortunately this is a patently negative reaction.

There seems to be little people can do to stop these falls. Anyone betting on EUR/USD retracing back up into the 1.30s is taking the investment equivalent decision of standing in front of a moving train; get it wrong and you are going to get cleaned out. The decision that the EU seem to have taken is to protect countries against sovereign debt default and use the euro as the release valve.

This is also, unfortunately, a massive dollar positive story. With it being a quiet weekend politically and economically there was little joy for the pound. The risk aversion crowd have been moving into USD and JPY at a frightening pace and subsequently GBPUSD is at a level not seen since March 2009.

One piece of news published overnight that will have affected GBP somewhat is the news that house prices in London fell in May for the first time this year as more houses were put on the market and lending conditions became more difficult. It seems that a lot of buyers were waiting for the election to be over and down with and gain some clarity from that. It does however look like this trend may increase and further price falls can be expected.

The data calendar is quiet today with only US NY Empire State Manufacturing of note. This leaves the void to be filled with a lot of fear over Greek prospects and subsequent negative risk shifts. It could be yet another day for European assets.