- ECB cuts refi rate 25 bps to 0.75%, lowers deposit rate to zero
- China cuts lending rate 31 bps to 6.00%
- Bank of England increases bond buying by 50B
- ADP employment +176K vs +105K exp
- Initial jobless claims 374K vs 385K exp
- ISM non-manufacturing index 52.1 vs 53.0 exp
- Draghi: downside risks have materialized
- Draghi quashes hopes for non-standard measures
- BuBa’s Weidmann says ECB must stick to its mandate
- Italy to postpone VAT hike
- Portugal missing deficit goal
- US launches WTO complaint vs China
- Spanish 10s +37 bps to 6.78%
- Italian 10s +21 bps to 5.98%
- German 10s -7 bps to 1.38%
- Gold -$11 to $1604
- WTI -$0.65 to $87.01
- S&P 500 -0.45% to 1367
- AUD leads, EUR lags (EUR/AUD hits record low)
Near-simultaneous easing from Europe, the UK and China sparked a wicked round of volatility that was further exacerbated by the tier-1 economic data of the day. One thing was clear, the euro was the loser as traders sold it early and often with only the slightest bounce.
EUR/USD broke below 1.25 on the ECB rate cut and it was straight down to 1.2363 from there. The June low of 1.2406 is now resistance and the post-Summit rally has been wiped out. A close below 1.2410 points to continued EUR losses toward the May lows of 1.2286. To the upside, some minor buy stops seen at 1.2410/15.
Adventurous day for USD/JPY. Risk aversion sent it lower to 79.56 and central bank cuts couldn’t turn the tide — but the ADP jobs data did. It sparked a rebound to 80.10 on diminished Fed QE expectations. I don’t see how one NFP print could change the Fed’s thinking but that’s the way it is.
Cable jumped up to 1.5607 on the 50B easing because it was less than the 75B speculated by some but the anti-European sentiment built afterwards and GBP-sellers were easy to find, sending the pair to 1.5500.
The commodity currencies were volatile. AUD/USD surged on the PBOC cut, touching 1.0327 and making record highs vs EUR. Sentiment rapidly changed after the ECB and the pair retreated nearly 10 pips in a choppy, sloppy move. Late in Europe, stock market sentiment edged up, boosting AUD back to 1.0287.
Trading was fast and furious until Europe closed and then some kind of post-July 4th hangover/pre-NFP caution took over and the market went comatose.