The buck lost some ground against the majors in London as the markets await the FOMC rate decision in the NY afternoon. The consensus is still for a -50 bps cut to 1.00% but the futures market has priced in 42% odds of a steeper -75 bps cut. EUR/USD added 45 pips and was sitting near the 1.2990 area on the risk of more aggressive cuts. USD/CAD shed -220 pips towards the 1.2580 area helped by a $3 overnight rally in oil to just above $66/bbl.
JPY crosses rose as global equity markets caught a bid on the heels of the surge in US stocks yesterday. Asia rose about 3.5% while Europe was currently up roughly 5.2%. USD/JPY rose 45 pips to 96.80/90 while EUR/JPY jumped 100 pips into the 123.80/90 area. US stock futures have recently turned positive after spending all night in the red and this should help nudge JPY crosses even higher.
In terms of the FOMC this afternoon, we are uncertain how much more stocks can gain given a likely bleak assessment and would reckon that a 50 bp rate cut might result in more of a "selling the fact" reaction in stocks rather than additional euphoric gains. Also, we are mindful of looming month-end portfolio adjustments that are likely to see significant USD-buying demand, as well as anticipated rate cuts next week from the ECB and the BOE. For those reasons, we look to use further gains in EUR/USD (on the back of EUR/JPY buying) and GBP/USD (from GBP/JPY buying) to sell EUR/USD and GBP/USD. See our FOMC preview for more details.
Upcoming Economic Data Releases (NY Session) Prior Estimate
- 10/29/2008 12:30 GMT US Durable Goods Orders SEP -4.50% -1.00%
- 10/29/2008 12:30 GMT US Durables Ex Transportation SEP -3.00% -1.50%
- 10/29/2008 14:35 GMT US DOE U.S. Crude Oil Inventories 24-Oct 3182K - -
- 10/29/2008 14:35 GMT US DOE U.S. Gasoline Inventories 24-Oct 2709K -
- 10/29/2008 18:00 GMT UK BOE's Blanchflower Speaks in Canterbury 29-Oct
- 10/29/2008 18:15 GMT US FOMC Rate Decision 29-Oct 1.50% 1.00%
- 10/29/2008 21:45 GMT NZ Building Permits MoM SEP -7.90% - -
