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New York Session
Thu, Sep 4 2008, 21:20 GMT
by Forex.com Research Desk
The ECB rate decision and following press statement were a relative snooze as the bank kept rates unchanged at 4.25% while Mr. Trichet followed up with the usual hard-line on inflation and almost timid admission that Eurozone growth is faltering. The bank shaved its growth forecasts for both 2008 and 2009 but Trichet continued to harp on the risks to a wage price spiral from higher prices. The initial knee-jerk upmove in EUR/USD was worth about 20 pips, with the pair dipping towards the 1.4440 area as the economic growth comments hit the tapes -- only to climb back to pre-ECB levels.
Luxembourg Finance Minister Juncker followed up moments later by noting that the European economy's current assessment is ''not good'', though he stopped short of saying flat out that the EU is slipping into a full-blown recession. The real bombshell came when he said that EUR remains ''effectively overvalued'' against many currencies and that he feels ''comfortable'' with EUR/USD below the 1.44 mark. The plunge in EUR crosses that followed was rather spectacular with EUR/USD closing the session down -150 pips near 1.4320/25 and EUR/JPY falling an astounding -340 pips towards the 153.45/50 area.
The US stock market had that sinking feeling all day and ended the session down about -3.0% -- the sharpest one-day decline in about three months. The selloff played a large part in the EUR/JPY selloff mentioned earlier and also helped take USD/JPY down by about -120 pips in the session, towards the 107.10/15 area. Financials led the way lower -- down a sharp 4.7% -- as chatter about credit market Armageddon dropped a huge load of fear on the market. We also wonder how many buyers left early to join the NY Giants tailgate party! An interesting support level for USD/JPY is now the top of the Ichimoku cloud which comes in at 106.60/65 and is a trigger for downside towards the bottom of the cloud near 105.70/65 next.
The market now eagerly awaits the US employment report due up tomorrow at 1230GMT/0830ET. Consensus is that nonfarm payrolls fell -75K in August and that the unemployment rate will remain steady at 5.7%. It will be interesting to see if worse than expected data can help EUR/USD recover some of the losses in today's blood bath. If despite bad data -- say -150K NFP and a u-rate at 5.9% -- we don't get a material improvement in EUR/USD, it will be clear that today's capitulation was for real and that a new line in the sand has been drawn. Better than expected results -- such as -30K NFP and 5.5% u-rate -- should see EUR/USD easily try through 1.4300 towards 1.4250 initially. Stay tuned!
Upcoming Economic Data Releases (Asia Session):
- 9/4 23:30 GMT AU AiG Perf of Construction Index AUG 41.6 - -
- 9/4 23:50 GMT JN Capital Spending 2Q -4.90% 0.20%
- 9/4 23:50 GMT JN Capital Spending excl Sftwre 2Q -5.30% -1.00%
Published on Thu, Sep 4 2008, 21:26 GMT
Archive
- New York Session
Published On Tue, Dec 2 2008, 22:13 GMT - London Session
Published On Tue, Dec 2 2008, 13:13 GMT - Asia Session
Published On Tue, Dec 2 2008, 07:41 GMT - New York Session
Published On Mon, Dec 1 2008, 22:28 GMT - London Session
Published On Mon, Dec 1 2008, 13:18 GMT
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