The highlight of Wednesday, though, was still to come. The FOMC announced that rates would remain the same but that �economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.� Moreover, the Fed indicated that it is to begin quantitative easing by purchasing an additional $750 billion of mortgage backed securities and $300 billion of longer term Treasury securities. These measures are designed to help mortgage lending and credit markets. On reading the above, the Dollar was annihilated in the FX markets with EUR/USD jumping to above 1.3500, its biggest one-day gain versus the dollar since its 1999 inception, GBP/USD to 1.4300 while USD/JPY fell below 96.00. EUR/USD slipped from just above 1.3500 to 1.3420 with reports of Chinese selling. This also saw EUR/JPY fall below 129.00 while USD/JPY was quietly trading just above 96.00. However, the Dollar is likely to come under further selling pressure over the coming sessions as the Fed�s action only serves to highlight the poor state of the world�s largest economy. The fact that, according to the FOMC statement, US rates will stay low for an �extended period� only underlines the fact.
[B]News and Events:
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European trading was overshadowed yesterday by GBP weakness following IMF comments about the UK being one of the last to emerge from recession and very poor jobs data which set off a wave of selling from Asian and Middle Eastern names. In the afternoon, the Dollar edged down after slightly higher than expected CPI figures and stories that the UN is to recommend that the world replaces the Dollar as its main reserve currency with a basket selection. The highlight of Wednesday, though, was still to come. The FOMC announced that rates would remain the same but that �economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.� Moreover, the Fed indicated that it is to begin quantitative easing by purchasing an additional $750 billion of mortgage backed securities and $300 billion of longer term Treasury securities. These measures are designed to help mortgage lending and credit markets. On reading the above, the Dollar was annihilated in the FX markets with EUR/USD jumping to above 1.3500, its biggest one-day gain versus the dollar since its 1999 inception, GBP/USD to 1.4300 while USD/JPY fell below 96.00. The Dollar will likely remain under pressure as the Fed�s actions indicate how poor a state the US economy is really in. After the abrupt and sizable Dollar sell off in the wake of the FOMC announcement yesterday evening, it is no real surprise that trading in the Far East was subdued, though choppy in parts. The Dollar Index suffered its biggest one day fall since 1985 after the Fed announced further quantitative easing steps. The Dollar did consolidate a little in Asia as some profit taking was seen. EUR/USD slipped from just above 1.3500 to 1.3420 with reports of Chinese selling. This also saw EUR/JPY fall below 129.00 while USD/JPY was quietly trading just above 96.00. However, the Dollar is likely to come under further selling pressure over the coming sessions as the Fed�s action only serves to highlight the poor state of the world�s largest economy. The fact that, according to the FOMC statement, US rates will stay low for an �extended period� only underlines the fact.
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Today’s Key Issues (time in GMT):[/B]
10:30 GBP Public Sector Net Borrowing 8.3B vs. -3.3B
10:30 GBP Public Finances (PSNCR) 4.5B vs. -25.1B
12:00 GBP CBI Industrial trends
12:00 CAD Consumer Price Index (MoM) 0.20% vs. -0.30%
12:00 CAD Consumer Price Index (YoY) 1.00% vs. 1.10%
13:30 USD Initial Jobless Claims 659K vs. 654K
13:30 USD Continuing Claims 5325K vs. 5317K
15:00 USD Philadelphia Fed Index -38.9 vs. -41.3
15:00 USD Leading Indicators -0.60% vs. 0.40%
18:00 TRY Turkish Interest rate Announcement 11.00% VS. 11.50%
18:00 CHF Jordan Speaking on Monetary policy of the SNB in Turbulent times
[B]The Risk Today: [/B]
[B]EurUsd:[/B] Euro gained yesterday 540 pips after the Fed published its quantitative easing plan of $300B Treasury purchases, which hammered the dollar across the board and propelled the Euro to levels above 1.3500. The pair is approaching key levels for a major upside move.
[B]GbpUsd:[/B] GBPUSD: Cable breached the key resistance for the downside channel supported by yesterday’s Feds rate decision. The downside movement may be over but to confirm the short term trend to the upside, the pair needs to build a solid base above 1.4085 to reach 1.4430 initially and then 1.4635.
[B]UsdJpy:[/B] USDJPY declined sharply yesterday where it seems to be heading towards the short term target after reaching the target for the bullish technical pattern that resulted from the breach of the 94.30 pivot level. We should see a short term upside correction before continuing the downtrend.
[B]UsdChf:[/B] USD/CHF entirely reversed its gains from last week (on SNB intervention). The market pushed below 1.1435 sooner than we expected and our next focus is on 1.1315. Signs of fresh demand are currently lacking.
[B]Resistance and Support:
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By[B] Loic Bondiguel [/B]- ACM Advanced Currency Markets, Geneva, Switzerland