The recent optimism in the global markets sparked by the 100 bn Euro bailout given to Spain, hailed by the Spanish Prime Minister as a ‘triumph for the euro’ appears to have waned with the USD finding favour once more as the safe haven of choice for investors in these troubled times.

The USD enjoyed gains against nearly all major currencies in Asian trading this morning – up .011% against the USD, up 0.14% against the GBP, and up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.08% at 1.0272, AUD/USD down 0.17% at 0.9942 and NZD/USD down 0.15% at 0.7760. Despite Japan reporting that its core machinery orders increased more 5.7% in April, beating the expected 2.1% increase, the USD also made gains against the Yen, up 0.15%, trading at 79.64. The US dollar index, which measures the performance of the greenback against a basket of six other major weighted currencies, was up 0.11% at 82.95.

The news coming from Europe dampened much of the optimism that pushed markets up on Monday. The credit ratings agency Fitch downgraded 18 Spanish banks, following on from its decision to cut the ratings on the country’s two biggest banks, Santander and BBVA. Spain’s borrowing costs have risen to the highest rate since the launch of the euro in 1999 with the benchmark 10 year bond yield reaching 6.81%. Over in Italy, another major cause for worry for investors the 10 year bond yield increased to 6.28%, a rate not seen since January. Greece, which will have its elections on June 17th, raised about 1.62 bn euros in a sale of six month treasury bills. However it is to pay an interest rate of 4.73%, up from 4.69% at the previous sale on the 8th May.

This morning investor focus will once more be on Europe (for a change!) Italian and Spanish CPI are released with the afternoon seeing the U.S. releasing official data on retail sales producer price inflation, business inventories and then keep an eye on Oil as the crude oil stockpiles figures are released following on from last weeks surprise drop on crude oil stockpiles.

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