- ECB keeps rates unchanged
- Trichet: December 16 1 year refi will be last; rate indexed to minimum bid rate
- US weekly jobless claims fall to 457,000 in latest week
- ISM non-manufacturing index falls to 48.7 in November from 51.5 in October; much weaker than expected
- Bernanke sees no extraordinary bubbles in US economy now; Fed must react to US conditions, not economic conditions abroad
- Trichet: Banks should face up to write downs; can cope with slow removal of liquidity
- US shares slide late in session; fall 0.8%; Gold slips modestly, closes at $1211; 10-year steady at 3.37%
There was some volatility that accompanied the ECB announcement after which markets quieted down dramatically. EUR/USD went into the press conference on a firm note, around 1.5120. Prices slumped to 1.5085 in one breath as Trichet said the ECB would offer full allotment for the last 12-month refi but prices then soared to session highs of 1.5148 within 2 minutes as Trichet announced that the remaining long-term refi operation would be indexed to the minimum bid rate. This is a very modest snugging of the excess liquidity in the system. Those gains were not sustained and prices soon slipped back below 1.5100.
EUR/USD slipped further after ISM service-sector data came in far weaker than expected. Dips were limited to 1.5060. Prices range traded in the 1.5085/95 region most of the afternoon before weakening with stocks late. We end at 1.5070.
USD/JPY rallied as high as 88.48 this morning but was unable to overcome a large 88.50 sell order. Dips were shallow with much of the afternoon spent range trading in the 88.20s.
Cable was weak today, reversing two days of strength. Prices fell to 1.6560 and EUR/GBP bounced to 0.9116 before easing along with EUR/USD. The cross ends at 0.9097.
AUD lost ground late in the session along with most aspects of the risk trade. It ended at 0.9245.
Two themes were picked up in today’s session. First, spec sellers were happy to sell strength on the approach of 1.5140 today. Also heard was talk that Japanese officials have asked Japanese corporates to refrain from hedging dollar exposures at present levels as they try and engineer an organic rally.
Payrolls are the focus to end the week tomorrow. Have a pleasant evening.
