- ECB cuts refi rate 50 bp to 1.5%, signals further cut to come
- BOE cuts bank rate 50 bp to 0.5%; adopts quantitative ease
- US weekly jobless claims dip to 639,000, continuing claims 5.1 mln
- US nonfarm productivity revised way down to -0.4%
- Almunia: European banks must disclose toxic assets
- BOE’s King: No limit to how much money Bank can inject into economy; official rates won’t go lower, downplays inflation risks
- Fed’s Lacker: Rates to be near zero for some time, expects home prices to find equilibrium near year-end
- Liquidity impaired during US morning as EBS experiences service interruption.
- White House sets low expectations for employment report
- US equities close 4.25% lower at levels not seen since 1996. 10 Year note 22 bp lower at 2.81%
EUR/USD slumped after the ECB gave the market a tepid 50 bp cut and painted a very negative landscape for the European economy for the remainder of 2009. It begs the question why they were so timid, but that is the ECB’s nature. The lack of fresh stimulus from China was a major disappointment and weighed on the EUR intraday. EUR/USD dipped to 1.2480/85 briefly during the ECB press conference but steady sovereign demand for the euro helped prompt a modest rebound to the mid 1.25s. Heavy US stock losses did not impact the market much with many waiting for Friday’s payrolls. EUR/USD traded in a 1.2483/1.2582 range in NY
USD/JPY traded quietly most of the session on the 98 handle before heading lower just prior to the Wall Street close. Dealers noted strong profit-taking on the approach of 100 earlier in the day and selling of EUR/JPY on disappointment in the ECB weighed as well. Lower US bond yields weighed on the buck, triggering stops below the 98.00 level late. 97.71/99.35 was the New York range.
Cable held its ground despite the move by the Bank of England to adopt quantitative ease. 1.4038 was the post rate-cut low; 1.4160 was the NY high.
