Daily Market Update 19/03/2008

The mid-week London Session has brought a return to the fast and furious pace of volatile trading conditions and active rumor mill. Currencies have whipped around with a reckless abandon, instinctively popping and dropping at the sight of each official and unofficial news items that paints the computer screens of traders around the world. The constants in the market are as follows: the primary theme of corporate credit health concerns remain prevalent and residual effect is an electric nervousness circulating the globe. The net result of today's events has been profit-taking, shown by the significant reversal of yesterday's FX moves.

From the moment London traders saw the green and red arrows flashing, rumors of ''the next major financial institution on the brink of disaster'' briskly travelled. Folks dealt first and asked questions later, though virtually all speculation has been quelled by the top-tier employees of specific firms. Despite the public defenses of these companies, market players fear that ''Where there's smoke, there's fire'' and have meaningfully impacted their equity prices. This flight to safety – a mere 12 hours after Wall Street's largest rally in years – has transferred to the FX market. In a broad scope, the Japanese Yen has been bought across the board, pushing USDJPY back below 99.00 and EURJPY down to the 154.00 zone. During a specific 10 minute period in which liquidity worries made their way to a UK mortgage bank, volatility spiked as the British Pound collapsed from 2.0140 to 2.0040 versus the Greenback. EURGBP skyrocketed 70 points in a New York minute while GBPJPY went into an astonishing 370 pip freefall from 199.50. The markets are as jumpy as they come and traders simply cannot predict what the next moment will bring.

As if market participants did not have enough information to feast upon, important UK data came at 0530 EDT (1030 GMT). The employment figures took a back seat to the Minutes of the last Bank of England Meeting. The 7-2 ''no change'' vote was accompanied by dovish text. The message of future rate cuts was interpreted loud and clear by traders. Another wave of sellers briefly took GBPUSD below $2.00 before the pair bounced back above the psychologically significant level, rounding out a robust London range of two big figures (200 pips).

New York traders should be very active today...