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Daily FX Report

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Central banks around the globe cutting interest rates to stabilize the world wide economy

Thu, Oct 9 2008, 09:21 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from wonderful Hamburg. Yesterday we have seen large interventions from central banks around the globe cutting interest rates to stabilize the world wide economy and bring back confidence to the market participants.

Market review

Due to the coordinated string of central bank rate cuts the AUD/JPY and EUR/JPY buyers got more risk appetite and speculations grows of more joint actions, such as to guarantee interbank lending. The Nikkei average surges more than 2% after suffering the worst 1-day drop since the crash of 1987 on Wednesday. There are still hopes that governments might take more action to fight the financial crisis. The EUR/JPY is up to more than 2% at one point, the gaining as a rise in Nikkei helps investor appetite to improve a bit.

Volatilities remain at extremely steep levels and even in some cases nonsensical levels, some traders said. The sell-off in the AUD has sent levels of implied volatility spiking into uncharted territory. The AUD/JPY jumps about 5% to 69.75 with a day-opening at 66.33 but crashed 20% in the first three days of the week. The EUR/JPY is up more than 2%. The EUR/USD climbs as high as 138.39 before falling back to 137.95. The USD/JPY rises 1.8% to 1010.85.

The employment of Australia rose about 2,200 in September, with forecasts for a flat reading. As expected the unemployment rate at 4.3%. The job participation rate is below forecasts at 65.1%.

EUR/GBP

In the middle of August the EUR/GBP broke through the 0.784 and showed after that a huge rebound with breaking the 0.802 resistance level. A similar movement we can see now. When the market doesn’t come back from its break through at the 0.784 level we could assume further bullish movements.

GBP/CHF

Since August the GBP/CHF has traded in a strong bearish trend channel. In the beginning of September the market broke through the lower trend line and touched the 1.96 support level. Now the pair has crossed the support and the lower trend line which might be a clear sign for further bearish movements.

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Published on  Thu, Oct 9 2008, 09:29 GMT