- ECB’s Weber: Financial stability needs to play a role in monetary policy; hard to spot, burst asset bubbles with monetary policy; unconventional measures expire on their own unless renewed
- US factory orders rise 0.9%, slightly better than expected
- Berkshire Hathaway buys Burlington Northern for $34 bln
- Gold sets fresh record high at $1087 after India buys half of IMF’s gold
- US budget director Orszag: Deficits unsustainable, to take measures in 2011
- G20 to discuss but not implement exit strategies; currencies will be discussed in the context of macroeconomics; US Treasury official
- US auto sales improve in October
- Lisbon Treaty to come into force December 1: Sweden
Lots of cross currents in the markets today making trading particularly difficult today. Traders had to sort through the impact of a major M&A deal on the psyche of the market as well as a moonshot in gold prices and a reversal of fortune in GBP.
EUR/USD ran into solid selling on early rebounds to the 1.4670 level, leading to a retest of session lows about 1.4630 at mid-morning New York time. Prices soon rebounded amid talk of Asian sovereign demand at the low, which coincided with the 55 day moving average. A subsequent $20 rally in gold to fresh all-time highs above $1070 soon prompted shorts to begin covering, but rallies still had trouble overcoming 1.4685/95 until early afternoon in New York. The rally reached 1.4730 before stalling. A fair number of intraday shorts have been squeezed out already while more stops lie in the 1.4745/50 area.
Cable was its usual death-defying self. Cable broke through recent lows in the 1.6285 area but shorts were quick to cover as follow-through to the downside proved skimpy. Prices began to zoom higher at mid-morning in New York as a US custody bank dumped a large EUR/GBP order on the market and rumors that Kraft will firm up a bid for Cadbury by the end of the week made the rounds. Traders short the pound in anticipation of a fresh dose of BOE gilt-buying were soon scrambling for the exits. Cable reached 1.6455 before relenting.
USD/JPY’s moves were less dramatic. The buck worked through 90.50 offers, reaching 90.57 highs. Pullbacks were muted by a rebound in EUR/JPY.
AUD was under heavy pressure in early US trade as markets feared a spiral lower in most, if not all,aspects of the risk trade in the early going. The fresh all-time highs for gold ($1087) put an end to those concerns and sent AUD as high as 90.37 on short-covering.
Markets are unlikely to settle down anytime soon with a barrage of data and central bank action still to come for the rest of the week. Don’t be short volatility!