- Switzerland announces additional CHF 400 mln in stimulus; downgrades growth outlook
- Norway cuts rates 0.25% to 1.25%
- US CPI rises 0.1% in May, core up 0.1%; CPI drops 1.3% y/y, largest drop since 1950
- US current account deficit falls less than expected, to $101.5 bln in Q1
- US mortgage refinancing slows dramatically as long-term rates rise
- S&P downgrades 18 US banks
- TARP funds paid back by 10 banks, total of $70 bln
- Oil demand lowest in month of May for a decade: American Petroleum Institute
- S&P says US AAA rating not likely to be lowered in near-term; positives outweigh negatives from deficits
- Senate Banking Chair Dodd: Not a lot of confidence in Fed (regarding new regulatory powers announced by White House today).
- Canada averts early election as Liberals agree to support budget outline
- Very choppy commodity bond and to a lesser degree, equity markets
Summer markets were among us for much of the session with markets content to range trade within the Asian-dictated parameters in EUR/USD between 1.38 and 1.3925. Asian central banks were noted buyers on weakness this morning in New York after selling at 1.3925 in early Europe this morning, as they did yesterday on several occassions.
Harsh comments toward the Fed by congressional leadership along with relief that Obama’s financial regulatory reform was not more Draconian helped spark a round of reflation trade-related buying. Stocks commodities and currencies all rallied, helping EUR/USD break through 1.3930, triggering stops in the 1.3935/40 area. Prices reached 1.3985 before pulling back late in the afternoon, closing at 1.3945. Bids are seen now in the 1.3920/30 area on pullbacks.
The reflation trade was unwound during the US morning. Oil fell to $69, stocks spent much of the morning under water while EUR, AUD and CAD were sold and JPY and CHF bought. By early afternoon it was 180 degrees the other way. AUD bounced from the 0.7850 area to 0.7980, USD/CAD fell from 1.1445 to 1.1280.
Cable was very choppy today, falling on critical comments toward the GBP rally in the BOE minutes before recovering with the rest of the currencies in afternoon trade. The rally reached 1.6445 in NY afternoon trade from opening levels of 1.6218 in NY.