The risk trade was pared in London trading on the back of the fallout of the $66 billion hostile takeover of Rio Tinto by BHP Billiton. This sent a small shockwave through equity marts as it reaffirmed the reality that the global economy is slowing down in a big way. European stocks drifted back to flat on the day (recently recovered though) and the risk trades in FX were lower on the follow.
EUR/USD was down a modest -20 pips and was sitting near the 1.2850 area ahead of the NY open. JPY crosses were expectedly weaker. USD/JPY slipped -45 pips towards 96.00/10 while EUR/JPY shed a more aggressive -75 points into the 123.50 area. This reversed promptly at the NY open as fresh news out of the Fed sparked a new rally in risk.
The news that the Federal Reserve will directly support consumer and small business lending led US stock futures markedly higher in the NY open. The S&P 500 went from negative small to up more than 24 points. This has Euro trading near the critical 1.3000 resistance zone though USD/JPY has failed to make a significant move towards the pivotal 97.50 area. We would expect higher US stocks on the day to see fresh intraday highs in the FX risk trades, though the risk of a reversal into the lows looms as well. Stay focused on the price action in equities.
Upcoming Economic Data Releases (NY Session) Prior Estimate
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11/25/2008 14:00 GMT US S&P/CS Composite-20 YoY SEP -16.60% -16.90%
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11/25/2008 14:00 GMT US S&P/Case-Shiller US HPI YOY% 3Q -15.40% -17.10%
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11/25/2008 15:00 GMT US Consumer Confidence NOV 38 38.5
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11/25/2008 15:00 GMT US Richmond Fed Manufact. Index NOV -26 -26
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11/25/2008 15:00 GMT US House Price Index MoM SEP -0.60% -0.70%
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11/25/2008 22:00 GMT US ABC Consumer Confidence 23-Nov -52 - -
