Traders flocked to the safety of the US dollar and the Swiss franc following reports of Saudi police firing on protesters in the Saudi Kingdom. In response, equities sold off and crude oil trimmed its losses in volatile trading.
In the New York session, uncharacteristic volatility was felt with the dollar rising sharply versus the euro and the pound. The dollar built on its gains for the day after reports hit the wires of Saudi demonstrators being met by gunfire to break up protests.
In response to the news, the EUR/USD fell to a fresh low at 1.3775 following the report. The Swiss franc gained versus the dollar and the euro while crude oil prices came off of their lows for the day and surged more than $2 in less than an hour.
The Dow Jones Industrials Average had its worst day since August 2010, finishing down 1.9% and closing below 12,000 for the first time since January 31st, though the index did manage to finish off its lows. The NASDAQ was also down 1.8%.
The Saudi report contributed to the negative tone of the trading day that began with a downgrade of Spanish sovereign debt by Moody’s. Traders were also disappointed when the Bank of England decided not to raise interest rates, prompting traders to sell the pound.
Market sentiment has quickly turned from the previous week where traders were focusing on higher yields in the Eurozone when euro was pushing to new highs. This week the European debt crisis has reemerged combined with geopolitical concerns in the Middle East which has caused a rush to the dollar as a safe haven play.
Tomorrow traders will be eyeing the EU Economic Summit for progress by European finance ministers working towards a resolution of the European debt problem. US core retail sales and UofM Consumer Sentiment are also on tap.