- US housing starts rise 0.6%; weaker than expected
- US housing secretary says government undecided on extending home-buyer tax credit; decision in weeks; very expensive for government
- US PPI falls 0.6%; weaker than expected
- Bank of Canada keeps rates unchanged; strong CAD more than offset favorable developments since last monetary policy report; hope for BOC hike before mid-2010 dashed. CAD weakens sharply
- ECB’s Liikanen: Downward economic spiral over but no sign of quick recovery
- Germany’s Merkel sees rough 2010
- IMF’s Lipsky: Asia to recover faster than rest of global economy; to early to remove stimulus
- Monetary Authority of Singapore official warns authorities watching growth of asset prices
- BOE Governor King makes no mention of extending QE but downcast on economy; lots of uncertainty given bank problems; calls for big banks to be broken up. Split risky bits from “utility” part
- Fed’s Yellen: Interest rate differentials naturally impact capital flows; structural deficits need to be addressed
- Oil closes at 79.09 after reaching $80; off lows; Gold at 1055
- US equities fall 0.6%; half of intraday losses; S&P ends at 1091
A sharp round of risk aversion swept through the markets this morning as yesterday’s move to impose a capital tax in Brazil upped jitters. The Bovespa fell 5% early in the day and the real fell to 1.7645 from 1.7170 before stabilizing. As the afternoon wore on, Brazil took back about half those losses. The dollar moved in tandem.
EUR/USD fell back from the 1.4975/80 area in early US trade to lows of 1.4883 before rebounding. Solid Asian central bank buying was seen at 1.4925 and 1.4885/95 (and rumored again around 1.4915 in afternoon trade. Solid selling was seen in the 1.4930 area this afternoon, but those offers were eventually absorbed and EUR/USD traded up to 1.4940 late.
The Loonie was undermined by comments from the Bank of Canada which dealers took to end any speculation that the BOC will follow the RBA anytime in the next 6-9 months. USD/CAD rocketed higher, triggering massive stops above the 1.0425 level after the meeting. Asian central bank sales were seen ahead of 1.0425 nd again ahead of 1.0500 before prices lifted as high as 1.0526 on CAD liquidation,
AUD slipped along with CAD, falling back to 0.9182 before steadying. It recouped lost ground throughout the US afternoon, recovering along with the rest of the risk trade.
GBP was insanely volatile today. Early in US trade it soared to 1.6488 as EUR/GBP was under intense profit-taking pressure. The cross found support in the 0.9065/70 region and bounced sharply in aft5ernoon trade. Rumors that King would announce a fresh round of QE in his Edinburgh speech this evening helped prompt the GBP slide. King refrained from mentioning QE helping cable rebound to 1.6375 from 1.6330 intraday lows.
