• ECB unexpected cuts rates 0.25% to 1.25: Draghi forecasts mild European recession by year-end
  • US weekly jobless claims fall 9,000 to 397,000
  • US labor productivity rises 3.1% in Q3, unit labor costs decline 2.4%
  • Berlusconi sends budget amendments dictated by the ECB to Senate; confidence vote seen Wednesday
  • Non-manufacturing ISM falls to 52.9 in October from 53.0 in September on expectations for 53.5
  • Jefferies Group shares fall intraday on concerns over European sovereign debt exposure
  • Greek referendum scrapped; rumors of imminent Papandreou resignation swirled throughout session. Talk now he will resign after winning a confidence vote tomorrow to allow his party to save face
  • Reuters reports G20 creating firewall around Italy, Spain
  • SNB’s Danthine: Will act to weaken franc if economic risks emerge
  • China’s Hu: Use of SPR should be expanded
  • Greek opposition leader says deal for transitional government has broken down; calls on Papandreou to resign
  • Chinese commerce minister calls 9% growth “China’s gift to the world”
  • Greek FinMIn: If snap election called, EU plan could unravel
  • Japan says G20 did not complain about solo intervention
  • Die Welt: France, EU Commission, US trying to persuade Germany to allow ECB to act more like Fed.

What day is this? How long have I been sitting here? I feels like forever…

EUR/USD essential closes unchanged on the US session at 1.3810 after sliding as low as 1.3660 after the ECB unexpectedly trimmed interest rates 25 bp and forecast a recession later this year. Also weighing on risk sentiment intraday were conflicting reports on the on again/off again Greek referendum. Any talk of no referendum sent the euro up while talk of a go-ahead for the referendum would cause a downdraft.

The updraft later in the session accompanied talk that the Greek opposition had agreed to back the EU bailout plan, obviating any need for a referendum. There was thought to be an agreement to have the PM resign, a national unity government replace him in order to enact the bailout, followed by elections once the dust settled.

That will likely play out, in the end, but there is a great deal of Kabuki theater playing Greek-style along the way.

The market was quite impressed with Draghi’s willingness to strike out on his own course as ECB president. He did not dodge the obvious drag on the economy from the sovereign debt crisis and confronted it head-on, unlike his predecessor who tended to be dragged along kicking and screaming when it was already too late. While lower rates tend to be a drag on a currency, this new pre-emptive style appears to be paying dividends for Draghi, and the markets, at least in the short-term. Equities and bonds both rose (yields fell) while commodities ticked up mildly.