• Philly Fed manufacturing index collapses to in August -30.7 from 3.2 in July
  • US existing home sales fall 3.5% in July
  • US leading economic indicators rise 0.5%
  • US consumer price index rises 0.5%/core rises 0.2%
  • Fed’s Dudley: Always evaluates US operations of foreign banks, US and foreign banks treated exactly the same; expects second-half US economic pick up; Fed has plenty of ammunition it can use; FOMC message has helped
  • Netherlands, Austria want Greek collateral if Finland gets it
  • Merkel: Euro bonds wrong solution to European problem
  • US 10-year note yields fall to record intraday yield of 1.97%; closes at 2.08%
  • Gold closes at record $1525
  • Oil falls $6 to $81.53
  • S&P 500 closes down 4.5% to 1141; DAX falls 5.8%

Another chaotic morning with European banks leading the risk rout until a horrible Philly Fed survey took the baton.

EUR/USD tumbled as low as 1.4270 as risk aversion ratcheted dramatically higher but prices soon recovered and a consolidation below 1.4335 played out for the balance of the session. Offers are seen on rallies to 1.4360 near-term. One suspects that China remains a heavy dip buyer keeping volatility from spiking.

One factor that helped stabilize the euro was talk that the SNB was back in the forward market in order to flood the domestic money markets with liquidity. USD/CHF fell as low as 0.7857 after the Philly Fed before recovering to end the session around the 0.7940 level. EUR/CHF slid to 1.1250 before recovering to 1.1380 late. So far so good for the SNB as they’ve managed to keep the franc from recouping its preeminent place in the forex pantheon.

AUD/USD fell close to the 38.2% retracement of the rally from the low 0.99s to 1.06 at the 1.0344 level today. We bounced from lows of 1.0354 to end at 1.0405 as stocks ended well off their late lows.

USD/JPY held the key 76.25 area and managed a slight rally late in the day in anticipation of more BOJ intervention in the forex market as well as fresh liquidity injection into the money markets by the BOJ.

GBP traded on a firm footing again today as EUR/GBP crushed once again. News that US-based Hewlett-Packard will spend $10 bln to acquire UK-based Autonomy Corp helped underpin the pound. From 1.6425 post-Philly Fed lows, cable recovered to end at 1.6525.