Aversion to risk and economic setbacks continued to form the backdrop for the forex markets today. The GBP dropped to 1.3620 as a result of the current banking crisis and the downward spiral of the UK economy. However, this morning’s UK session saw a rebound of GBP/USD to 1.3950 towards closing when it was confirmed that sterling will be discussed at the next G7 meeting in February in Rome.

The Swissie made the headlines and was the subject of a massive sell-off after the Swiss National Bank announced its intention to purchase an unlimited amount of foreign currency in order to effect a depreciation of the Swissie if the deflationary pressures persist. By the end of the London session, EUR / CHF had risen to 1.5000 after touching a low of 1.4735 earlier in the morning.

The USD and the JPY continued to profit in their respective roles as traditionally ‘safe’ currencies on the forex. The JPY is particularly strong - USD / JPY reached 87.15, whilst GBP / JPY fell below 120. However, this rebound of the JPY and the USD reversed as a result of the aforementioned information concerning the G7 meeting and the GBP.

To further strengthen the USD President Obama is already revising the unpopular $700 billion bailout program of the last administration. Timothy Geithner –  the 9th president of the Federal Reserve Bank of New York,  and Obama’s nominee-in-waiting for the position of Secretary of the Treasury (he should have paid his taxes!) – has acknowledged that the creation of a so-called “toxic” or “bad” bank is a serious consideration. This bank would acquire toxic securities from private banks, allow bankruptcy judges to modify mortgages of struggling homeowners, and increase credit for college students, car buyers, and small businesses and banks.

Maybe these changes throughout the frist 2 months of 2009 will see a return to a less risk averse forex soon.

Related posts:

1. Bad Bank Plan Dropped The U.S. Treasury has decided to drop plan to on...
2. New-York session update - 6 Jan 17:00 GMT After the Euro plunged today against most majors...
3. Wall Street is ruining it for Obama Obama was announced the 44 president of the United states....
4. This week- British Bank set to slash rates The British pound closed last week at a 7 year...
5. Pound plunges on U.K bank concerns Record Lows for Pound based pairs today. Grim prospects over...