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Fiscal Cliff Concerns Lead to Risk Aversion

 November 08, 2012 11:39 AM


The euro, already trading at a two-month low against the US dollar, is extending its bearish trend as investors continue to worry about euro-zone debt and the impending US "fiscal cliff." The fiscal cliff consists of around $600 billion in spending cuts combined with tax hikes that is set to take place at the end of this year unless the US congress can negotiate a plan to reduce the deficit.

While fiscal cliff concerns are likely to remain on investors minds for the foreseeable future, the more immediate cause for worry appears to be the ongoing euro-zone debt crisis. While the common-currency received a moderate boost yesterday following the Greek parliament's approval of a new batch of austerity measures, the bullish movement proved to be short lived.

[Related -3 US Updates Show Ongoing Growth]

For clues as to how the euro will be performing for the rest of the day, traders will want to pay attention to the ECB Press Conference at 13:30 GMT. Weak data from across the euro-zone has led to speculations that the ECB may soon cut interest rates. Any sign of an impending rate cut today could lead to significant market volatility.

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