• Bank of England keeps rates steady, refrains from adding to QE
  • US weekly jobless claims fall 26,000 to 550,000
  • US trade deficit widens to $32 bln in July from revised $27.5 bln in June; imports jump, hopes economy improving
  • Canadian trade deficit C$ 1.37 bln in July
  • Germany to offer dollar-denominated bond next week of at least $3 bln; first since 2005
  • Moody’s maintains negative outlook on US banking sector
  • US sees 358,000 foreclosures in August: RealtyTrac
  • Bank of Canada keeps rates steady, sees faster growth in second half of 2009. Warns on strong CAD.
  • Fed’s Lockhart: Fed could stop short of buying all $1.2 trln in MBS program
  • US Treasury sells $12 bln of 30-year bonds at 4.238%; bid-to-cover strong at 2.92
  • Geithner to appear on CNBC at 7 pm New York time
  • S&P 500 rally to new 2009 highs of 1043.76, up 1%.
  • Bonds rally on strong demand for 30-year bonds; 10 year note ends at 3.35%; gold closes at $995.

It was a wild day in the majors today. Morning action was chaotic while the afternoon was quieter but in some ways more impressive.

EUR/USD jumped to a modest new high this morning after the combination of falling jobless claims and a wider trade deficit were seen as signs of economic revival in the US. “Risk-on!” was the cry and price jumped. The Bank of England helped cable by refraining from extending their QE program. Cable broke above 1.6600 and ran up to 1.6663 before a wave of profit-taking. Around that time, USD/CHF fell to test its December 2008 lows at 1.0367 and USD/JPY fell through 91.50 and triggered stops down to 91.40 before a bounce.

All sorts of rumors swirled this morning. There was unconfirmed talk of SNB buying of USD/CHF, talk of large selling of EUR/USD by the Indian and Chinese central banks as well as talk of heavy selling by leveraged accounts, all of which culminated in a EUR/USD slide to 1.4504.

Having seen a swift pullback, we along with many others, assumed the market would look to trim longs on rallies and keep prices well-below 1.4600 for the balance of the US session.

Not exactly. A rally on Wall Street as well as a slide in US bond yields helped send the dollar lower in early afternoon with fresh session highs of 1.4614 recorded and lows of 1.0357 in USD/CHF. GBP/USD stalled just pips below the 1.6689 level, the 61.8% retracement of 1.7040/1.6110.

AUD was unable to build in recent gains after soft Aussie dat overnight but the Loonie strengthened after the BOC said it saw a faster pick-up in growth. It warned against currency strength however, so gains were muted, to 1.0775.