We won’t get any more information about an ECB rate cut next week

Foreign Exchange Outlook : The US dollar is gaining ground today despite yesterday’s horrible ADP Macro estimate of private sector job losses in Dec. From the US open at 8 am yesterday at 1.3595, the euro slipped to 1.3558 by the time Asia was coming in last night. This is a minor move but also a halt to the euro’s upward momentum on Tuesday.

We won't get any more information about an ECB rate cut next week. The FT reports today that the ECB is likely to leave rates on hold, but today starts the no-comment period so we have only old reports. Euros to dollars volatility is very high on the uncertainty.

In Asia overnight, falling stock markets and re-evaluation of the Obama Effect triggered a bout of risk aversion. The US dollar fell against the Japanese Yen in a continuation move from the day before, from 93.20 at 8 am yesterday to the now-customary plunge at the end of the Asian day to 91.80 and so far to 91.33. This is near the bottom of the linreg channel on the hourly chart and the move "should" stop any minute now. If not, we have a downside US dollar exchange rates breakout that risks a return to the Jan 1 low of 89.46. .

Nothing has been stranger than the rise in sterling ahead of today’s BoE decision. The pound stopped falling last Friday at 1.4375 and has risen to breakout levels on the hourly chart in fits and starts, even surpassing yesterday’s high of 1.5281 by reaching 1.5292 this morning AFTER the BOE Monetary Policy Committee cut the bank rate by 50 bp to 1.5%, a new historic low and exactly as forecast by just about everybody. Again we have no reason for such a counter-intuitive move except that there are serious dumpers of euro in the euro/pound cross and it is bleeding into the pounds to dollars.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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