- Overnight jitters assuaged as WestLB bailout proposed
- US Q3 GDP revised down to +2.8% y/y
- Belgian business sentiment rises to -8.6 in November from -15.8 in October
- Case-Shiller home prices index rises weaker-than-expected 0.3%
- US consumer confidence rises to 49.5 in November from 48.7 in October
- FDIC insurance fund falls into red, troubled banks rise
- BOE’s King: Timing of exit challenging; doesn’t rule out further QE; will have to tighten substantially eventually; QE to be reassessed in February
- ECB’s Provopoulos: Final decisions on exit strategy at December 3 meeting
- SNB’s Roth: Monetary policy will have to be corrected soon
- US sells $42 bln in 5 year notes at 1.175%; very strong demand
- FOMC minutes: Labor market slack to keep inflation low; dollar bears watching
- IMF’s Strauss-Kahn: Euro probably a “bit too strong”, probably 50% of bank losses still hidden on balance sheets
- US equities close virtually unchanged; volume very light
- oil falls 1.8% to $76.13; Gold little changed at $1169; 10-year note yield slumps to 3.31%
Markets were thin and whippy in the US today with EUR/USD dropping to 1.4920 in Morning trade after its early rally topped out at 1.4888. The market was spooked by WestLB rumors but an eventual deal led by the German government to inject EUR 4 bln into the lender calmed jitters.The market tested the top of the range, stalling in the low 1.4980s after as-expected FOMC minutes before easing to 1.4965 at the close. Markets were quite thin today and will get worse as the week progresses toward Thanksgiving in the US.
While the ECB and SNB are discussing exit strategies, the Fed seems content with a “steady at the lows” course from Captain Bernanke and crew.
USD/JPY fell below 88.50 during the US morning, taking out rumored bids from Kampo. It fell to 88.36 before edging back up after US consumer confidence data beat expectations.
Cable was supported for much of the session with the market heartened to hear King talk about a recovery and the potential for exit strategies come February, though increasing QE remains an option. EUR/GBP fell toward 0.9000 support before a bounce while cable spent most of the afternoon in a 1.6565/95 range.
AUD is consolidating in ever-narrower ranges. 0.9210 is resistance at the top of the triangle with support at 0.9150. We end at 0.9185 in the States.
