- FOMC leaves rates unchanged but says rates will stay very low for a considerable period. No signs of new exit strategies like reverse RP; MBS program to be extended until end of Q1 2010 but amounts remain the same. Outlook on the economy upgraded. Full statement at link.
- Bank of Canada’s Longworth: Persistent CAD strength a risk to the economic recovery; BOC has a range of tools at its disposal despite very low rates (QE)
- PBOC’s Zhou: SDR proposal taken to counter the “mistaken view” that excess Chinese savings caused financial crisis
- US total FY 2009 issuance to reach $7 trln; $1.7 trln net new borrowing
- S&P 500 reverses gains in final hour, closes on lows, down 1%
- 10-year note yield eases after FOMC, down 5 bp to 3.40%
- Gold rally fizzles, closes at $1008 from $1017 highs; oil falls $3.50 after inventory build; ends at $68.25
- Geithner: Treasury winding don some emergency authorities; too early to declare victory
- French official expresses concern over present EUR/USD level; wants G20 to set timetable for addressing currencies
- ECB’s Weber: No need for policy makers to act now on interest rates
- US sells $40 bln in 5-year notes at 2.47%, bid to cover at 2.40
EUR/USD closes at its lows of the day at 1.4730 after reaching 1.4840/42 after the FOMC left policy unchanged and signaled maintenance of the status quo. That news suggested more of the same for the markets and traders jumped back into the reflation trade with both feet. The ride was short and prices soon hit a dead-end, prompting position liquidation across the markets.
The inability to maintain its footing above 1.4840 spooked longs and a retracement looks likely ahead. Heavy buying of 6-day 1.4600 EUR puts ($500 mln) was seen this morning, a bet that looks better and better.
Rumors of options protection was head in both EUR/USD ahead of 1.4850 and in AUD in front of 0.8800. Rumors of RBNZ sales in the 0.7250/70 area were heard late in London this morning. .
