- FOMC reiterates intention to purchase $600 bln of Treasuries and reinvest MBS interest and prepays; Economy improving but too slowly to lower unemployment
- US Treasury yileds soar despite nothing new from Fed; brush 3.50%. Close above Fibo at 3.37% at the 3.44%
- US retail sales rise 1.5% in November; firmer than expected
- US PPI rises 0.8%; core up 0.3%; firmer than expected
- Berlusconi survives no confidence votes
- US business inventories rise 0.7%
- US National Retail Federation ups sales predictions
- Japan to cut corporate taxes
- BOC’s Carney: Don’t downplay risks to Canada from Europe
- House Democrats likely to pass tax package
- US equities lose gains late again, ends up 0.1%
Another very choppy day but as the dust begins to settle, the dollar finds itself on marginally changed compared to last nights closing levels.
EUR/USD slumped from the outset, falling back from the 1.3480 level (having traded to 1.3500 in London) to a low of 1.3362 after a renewed back up in US bond yields following the upbeat US retail sales data and the hotter than expected producer price data. Intraday trading was very choppy as liquidity thins out with each passing day of the balance of the year.
We headed into the FOMC meeting with the EUR around 1.3425; we eased to the high 1.3360s as US yileds brushed 3.50% before recovering slightly into the close as yields slipped to 3.45% at the close. EUR ends around 1.3380.
USD/JPY traded largely in line with US bond swings. There were a few aberrant moves, like a slide to 83.15/20 as London squared up. We end the day near 83.70, supported by firmer yileds but still well south of the 84.40 region which has capped us the last several weeks.
AUD/USD was quite choppy but garnered some support from firm commodity prices for much of the day. Another record high close in copper was a help. We pushed above 1.00 again after the Fed, reaching 1.0024 before slipping back below 1.00 into the close. We end at 0.9995.
The CHF is the darling du jour with US bond yields rising and some investors unpersuaded that higher yields will benefit the buck in the long-term, the franc is once again a place of refuge. Large USD/CHF and EUR/CHF sales went through today in a very illiquid market.
We fell as low as 0.9557 intraday and end at 0.9590. EUR/CHF fell to 1.2840 and closes at 1.2855.
GBP was sold very heavily in the London afternoon on talk of GBP/AUD liquidation and on rumors of UK buying of EUR/GBP to fund the UK contribution to the Irish bailout.
As a side note, Ireland votes on the EU/IMF deal tomorrow. Could be good for some fireworks if popular pressure gets to just a handful of MPs.
