- Bank of England keeps refi unchanged at 0.5%, adds GBP 50 bln to QE
- ECB cuts refi 25 bp to 1.0%; “not lowest rate” , extends maturity of bank loans to 1 year from 6 months, to buy EUR 60 bln covered bonds
- US weekly jobless claims fall 34,000 to 601,000
- US non-farm productivity rises 0.8% in Q1
- Obama announces $17 bln in belt-tightening to $3.5 trln budget
- Wal-Mart sales rise 5% in April
- Czech and Danish central banks cut rates after ECB
- Buba’s Weber: Speculation to think ECB rates could go lower
- US toxic asset plan not ready until June: White House
- US consumer credit falls sharply in March; Down a record $11.1 bln
- US 30-year bond auction poorly received; rates rise
- US equities fall 1.3% after poor auction, reversing early gains
Wild volatility greeted the ECB move. The headlines at 11:45 GMT contained no mention of QE measures which gave the EUR a boost to 1.3380 from the 1.3300 area. The announcement that there would in fact be several measures to “enhance liquidity”, EUR/USD initially fell to 1.3260. The limited scope of the QE steps then helped spark a bounce which saw EUR/USD reach 1.3470 before slipping for much of the balance of the session.
The reflation trade was quite strong early in the day after the jobless claims data. AUD/USD vaulted to 0.7615 briefly before running out of gas. Oil added an additional $2 early but closed essentially unchanged.
USD/JPY’s action was confined to the early going with prices jumping to trigger stops above 99.60/65 but quickly slipping back to the 99.00 area where it spent most of the session.
Cable ran into selling ahead of the 1.5200 level with a Middle Eastern central bank seen as a heavy seller of GBP versus both the dollar and EUR, taking some profits. Rumors swirled that the EUR/GBP leg was upwards of EUR 1.5 bln. Cable posted an outside day key reversal, suggesting a medium-term pullback is at hand. It fell to 1.4945 during the NY afternoon as trailing stop-losses were triggered in the 1.4980/90 area.
The US bank stress test results are due within the hour. Non-farm payrolls become the focus after that. Expectations are now for a decline of about 575,000 jobs after the improved ADP and jobless claims data.
