- ECB’s Nowotny: No rate hike in H1 2011
- UK’s Osbourne: Fiscal policy gives BOE freedom to keep rates lower for longer
- Germany’s Asmussen: Germany may accept lower bailout loan rates in return for stricter fiscal rules
- Case Shiller house price index falls 1.6% y/y
- Richmond Fed index falls to 18 in January from 25 in December
- US consumer confidence soars to 60.6 in January from 53.3 in Decmber
- EFSF launches successful bond sale, garners EUR 44.5 bln in bids for EUR 5 bln in bonds. Japan buys 20%, as expected
- Central Bank of Ireland’s Honohan: Sees potential for more bank loan losses; not surprised market interest rate expectations are shifting
- Former BOE Blanchflower: Weak pound was an BOE policy objective
- Obama to propose 5-year spending freeze on non-defense discretionary spending
- Payrolls fell in 35 of 50 states in December
- BOE’s King: Inflation could reach 4-5% before falling back toward target next year
- US yields fall 7 bp on the day to 3.34%
- CRB falls 1.5%, oil falls $1.60 to $86.25; S&P 500 closes flat, recovers 10 point intraday loss late
Wild is the best way to describe today’s US session. We inherited EUR/USD at the lows of 1.3577 after heavy profit-taking below 1.3625 and 1.3600 trigger stops. Buying from reserve managers was rumored all day in the 1.3550/70 area so traders were quick to cover once we began to bounce. Offers at 1.3625/30 held the first bounce but before long we were back up attacking the recent highs in the 1.3680s. Heavy buying from a European investment bank led the way, with some balming a reserve manager as the ultimate customer. The move came amid very upbeat results for the first EFSF auction, so some feared EUR was being bough to pay for the issue.
We pulled back to 1.3605 shortly there after, however, as the failure to surmount the 1.3700 area prompted book-squaring. Comments from the Irish central bank governor that more loan losses may lay ahead for Irish banks helped cool the rally.
Real money accounts were buyers all day today, especially around the 1.3600 level, and we bounced back to the highs again in afternoon trade and finally overcame 1.3700 briefly, triggering stops up to 1.3705 before stalling. 1.3735/40 is solid resistance above the market.
GBP/USD was croaked today after weak UK GDP ended any hopes for a quick BOE cut. Incoherent comments from BOE Governor King this afternoon helped send EUR/GBP to its highest level since November at 0.8668, breaking a downtrend in the process.
Cable found buyers in the 1.5770s during the US morning but rallies were limited to the 1.5830s…Resistance now lies around 1.5860.
USD/JPY slid as low as 81.97 this afternoon as US yields dropped and the dollar lost ground across the board. We rebounded toward 82.20 late in the day as US stocks recovered all the roughly 0.9% they lost intraday to close flat.
Japan bought 20% of the EFSF bond issue (as advertises two-weeks ago) but they redeployed other euro reserves to pay the tab, we have been lead to believe by the finance ministry, meaning the BOJ will not need to buy EUR/JPY to fund the trade…
AUD/USD rebounded during US trade, largely following EUR/USD, Soft commodity prices and the late-day announcement of a flood-levy to pay for damages from the recent rains may keep the Aussie a laggard compared to the rejuvenated euro.
USD/CAD trades up to 1.0000 on weak crude before easing to the 0.9950 later in the day.
The Swiss franc was quite firm on the day, moving with the euro rather than in opposition to it today. A US hedge fund sold $400 million very early in the US session, knocking USD/CHF from 0.9490 to 0.9440 straight away and it pretty much struggled the rest of the day from there…