- US consumer loan delinquencies rise to record levels
- Talk of second US stimulus plan spooks markets
- UK’s NIESR says UK economic growth fell 0.4% in Q2, retracts earlier pronouncement that UK recession over
- ECB’s Weber: No credit crunch in Germany; won’t go around banks to lend to companies
- ECB mops up EUR 276 bln in excess liquidity
- US sells $35 bln 3-year notes; more than half of issue bought by central banks
- Italian 2009 GDP forecast lowered to -5.2% versus -4.2% previously: Italian Treasury
- World Bank’s Zoellick: Dollar to remain reserve currency; US must be mindful of fiscal concerns, fix budget after crisis.
- Canada’s Ivey PMI rises to 58.2 from 48.2; building permits jump 15%
- S&P 500 breaks and closes below 200-day moving average; holds 877 support; closes at 881, down 2.0%
- US 10-year note closes at 6-week low yield of 3.44%.
- Oil closes at $62.50, -$1.50
Tuesday was the reverse of Monday. New York opened with EUR/USD at its highs of 1.4050. Prices trended lower throughout the session with only one modest 1.3975/4010 retracement, ultimately slipping as low as 1.3910. Unwinding of the reflation trade was the theme once again with fears of a protracted recession returning. These fears were further fueled by the news from the NIESR that the UK economy remained in recession in the second quarter of the year.
That news helped undermine the pound, pushing it as low as 1.6120 against the dollar and as high as 0.8655 against the EUR before general EUR weakness knocked the cross to 0.8630 at the close.
The low-yielding JPY and CHF were in demand today as risk aversion prompted traders to unwind carry trades. AUD and CAD were weakened by those flows same flows.
USD/JPY fell to test the Monday lows in the 94.70 area and EUR/JPY did the same at 131.80. Selling by the BIS was seen in USD/JPY at the 95.12 level late in the European session, traders reported.
USD/CAD was undermined by the slide in equities and oil. Strong Canadian data saw prices dip for a short while this morning but heavy hedge fund buying soon ramped USD/CAD back into the 1.1650s. Selling from an Asian central bank was noted again this afternoon above the 1.1650 level for a second day running.