Forex News and Events:
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Wednesday saw some big moves in FX markets once again. Risk aversion was still the dominant theme after Tuesday’s disappointment at the US rescue plan. It looks like a classic case of ‘buy the rumor, sell the fact’ as regards the stimulus package. There is a real fear that the authorities are now no closer to repairing the damage than at the start of all the problems.
There was, however, a blip higher in JPY crosses in the early part of the session as traders tried to hunt down some stops but the strength did not last long as the market soon found plenty of offers which saw the market move back down and onto lower levels.EUR/USD came under a little pressure and moved down to 1.2850 with some people citing an article in the FT about Europe heading towards zero interest rates as the catalyst. The market made back most of these meager losses though.
The Yen rose against the US Dollar and the Euro as stocks declined on concern U.S. Treasury Secretary Timothy Geithner will fail to revive bank lending, boosting demand for Japan’s currency as a haven.
The Euro also fell for a third day against the Yen on speculation a report today will show industrial output in the 16 nation region slid the most in almost 23 years, giving the European Central Bank more reason to cut interest rates. The US Dollar weakened against the Yen for a fourth consecutive day before a U.S. report that economists say will show the number of Americans filing first-time jobless claims remained near a 26-year high.
The pound also slid for a third day and gilts climbed on concern the British recession is deepening, depressing demand for riskier assets such as stocks.The currency dropped against the yen as the benchmark FTSE 100 Index of stocks declined 1.11%. Bank of England Governor Mervyn King said yesterday the economy is in a “deep recession” that may prompt policy makers to keep cutting interest rates and pump money into the economy. Cabinet minister Ed Balls said on Feb. 7 the government faces an economic crisis worse than the Great Depression.
The Australian Dollar pared gains after the Senate rejected Prime Minister Kevin Rudd’s AUD 42 billion ($27.4 billion) stimulus package aimed at helping the economy avoid a recession. New Zealand’s currency rose.
The vote in Australia’s Senate was tied, meaning the planned legislation was automatically defeated. Australian Dollar earlier gained after a government report showed employers unexpectedly added full-time workers, and as China, Australia’s second-largest export market, said new loans rose to a record.
