- Choppy intraday swings, especially around the release of the FOMC statement but no new ground in EUR/USD in New York
- US new home sales rise 18& in December; sales fall 14.4% in 2010
- Congressional Budget Office forecasts $1.5 trln US budget deficit for 2011
- ECB’s Stark: Will not monetize debt by allowing inflation to take hold
- Trichet: Bailout fund could be used to buy bonds, recapitalize banks
- ECB’s Quaden: ECB will act on inflation if necessary
- ECB’s Nowotny: States that restructure debt could still use Euro, markets too euphoric over large EFSF rescue fund.
- FOMC leaves rates unchanged; economy slightly improved but not strong enough to lower unemployment
- RBNZ leaves rates unchanged at 3.0%; rates to stay low until economy more robust
- S&P 500 closes at post-Lehman high of 1297
- US 10-yr note yields rise 9 bp to 3.42%
- CRB index rises 1.6%; gold recovers to $1344
EUR/USD chopped around in New York today, slipping early in the day despite multiple reports of central bank buying on shallow dips. We edged as low as 1.3643 briefly before quickly rebounding toward 1.3700 as Asian central banks remained buyers on weakness. Protection of barriers at 1.3725 (and more at 1.3750, helped slow the rally, as did profit-taking ahead of the 61.8% retracement of the 1.4280/1.2860 decline which comes in at 1.3735-ish.
Late in the day, the inflation vigilantes got what they expected from the Fed (not much) and set about buying gold again. The US yield curve steepened and rates rose, suggesting the market remains skeptical of the Fed and fear they are falling behind the inflation curve even as official inflation data remains muted.
GBP fought back today as profit-taking hit EUR/GBP and shorts scrambled to cover in cable. One catalyst was a second vote to hike rate as the MPC minutes were released today. India was a buyer of pounds again today. Cable ends at 1.5905, near its best level on the day, while EUR/GBP closes at 0.8610 from the 0.8670s this morning.
USD/JPY was choppy within familiar ranges. We flopped around between 82.20 and 50 during the US afternoon. USD/JPY caught a bid after the Fed as yields rose but it ends lower in the range at the close, at 82.22.
Not much to report in the commodity currencies today. AUD gyrated between 0.9935 and 0.9990 in US afternoon trade, ending close to the highs.
The CHF was moderately firmer on the day. Traders are using the CHF to express a view on the growing democracy riots in countries like Egypt. The more unrest, the better the franc does…EUR/CHF ends at 1.2912 and USD/CHF at 0.9420.
