The upswing in risk taking on the back of the announced bailout of a major US bank continued into the NY session. US stocks surged more than 6% in what was the biggest two-day gain since the post-1987 crash rally. President-elect Obama announced the key members of his economic team and alluded to the fact that he is seeking a major fiscal stimulus package to ''jolt the economy back into shape''. The numbers thrown around thus far (though not official) are near $500-700 billion.
The FX risk trades added to gains from the London session. EUR/USD jumped 130 points and was sitting near 1.2900/10 as we approached the NY close. The 1.2930 level, which was the high back on November 10 looks to be the next trigger for upside here. JPY crosses pushed accordingly higher as well. USD/JPY added 120 pips to just above the 97.00 mark while EUR/JPY surged more than 280 points into the 1.2520/30 area.
The strong performance in US stocks could set the pace for FX now. However, the risk remains that we get an unwinding in the renewed "risk trades" overnight if Asian marts do not follow through with a strong performance. This would translate into lower JPY crosses and weaker EUR across the board. Look for EUR/USD 1.2850 and EUR/JPY 124.00 as the triggers for downside here.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
- 11/25/2008 2:00 GMT NZ RBNZ 2yr Inflation Expectation 4Q 3.00% - -
- 11/25/2008 5:00 GMT JN BOJ Monthly Report
