- Atlanta Fed’s Lockhart: Fed may need to buy $100 bln in securities a month for QE to impact US economy
- US housing starts rise 0.3% in September, building permits fall 5.6%
- Fed’s Dudley: Current situation “wholly unsatisfactory”; more QE needed
- Chicago Fed’s Evans: Boost inflation temporarily via asset purchases
- BOC leaves rates unchanged at 1%, lowers GDP forecast
- ECB’s Stark: No currency war, yet; fears protectionist spiral
- Fed’s Fisher: Gold price signals discomfort
- New York Fed joins Pimco and Blackrock in suing Bank of America over mortgage deals.
- BOE’s King: Inflation could undershoot as well as overshoot; calls for “grand bargain” on currencies, imbalances
- BHP poised to walk away from mining tax deal: The Australian
The dollar surged today as traders rushed to reduce risk after China surprised the market by raising rates. The darlings of the QE-driven rally in currencies the Aussie dollar and the euro were hardest hit as investors and traders fled crowded trades for the safety of the sidelines.
Gold fell over $40 from session highs in a sympathetic move while oil fell even more in percentage terms, down more than 4%. US equities fell about 1.6%.
EUR/USD looks to have put in a top upon breaking 1.3830/45 support and slid as low as 1.3713 before stabilizing. Selling was particularly heavy this afternoon after 1.3760/70 support was breached. That level will act as resistance on rebounds near-term.Weaker than expected ZEW sentiment data as well as violent pension strikes/protests in France are undermining the euro, as well.
AUD/USD fell as low as 0.9664 as the Chinese rate hike prompts fears (likely overblown) of an economic slowdown in Asia. The crowded nature of the long commodities, short USD trade were much more to blame, with China only the catalyst which started the chain reaction, not the sole reason for the drop. News late in the session that the Aussie mining tax may again be in play was unwelcome news as the market struggles amid uncertainty.
USD/JPY was boosted through stops in the 81.70 area early in the US session as the dollar caught fire across the board. The rally nudged above the 10-day moving average at 81.87 briefly but prices soon pulled back into the well-worn range in the mid-81s on EUR/JPY and AUD/JPY selling. Dovish comments from the BOJ governor had little impact.
EUR/GBP slumped sharply on stop-loss selling today, falling as low as 0.8741. We end near those lows with cable modestly above its lows, ending at 1.5705 from 1.5682 lows.
Look for the heretofore unshakable confidence of the dollar bears to shift in the near-term. EUR/USD and AUD/USD will be sold on rallies rather than bought on dips over the next few sessions.
