Forex ECB Leaves Rates Unchanged and the Euro Falls

The Usd remains resilient against most of the G10 as Traders line up bets that global economy is entering a period of slowing growth. The EurUsd dropped over 200 pips finding support at the low 1.38 level, while the UsdJpy followed suit but losses were moderate at around 60 pips pushing the currency to the low range of 105. The GbpUsd fell as much as 140 pips, but has since bounced back down 60 pips at the low range of 1.76. Equity markets declined, with the Dow in particular down 245pts, and the DAX weaker by 145pts. The flight to quality assets was apparent in the recent buying of treasuries, with the 2yr yields tighter by 13bps and under the 2.00% level. Commodities continue to unravel, as oil trades with a 95 handle, and gold lower at 842. The ECB decided to leave rates unchanged at 4.25% citing the deteriorating conditions in the Eurozone. Traders lined up bets that the ECB will cut rates before year-end, this is a move which may be perceived as long overdue considering the current economic environment, and corroding banking sector. The Euro has suffered losses across the board, and is likely to carry this trend into year-end. UK housing data hit its lowest levels since 1991, which was a major driver behind the weakness in cable trading. We remain bearish on the sterling looking for levels closer to 1.70 against the dollar before 2009. Financial Markets in the US are trading sensitively to news regarding the bailout. Usd performance has taken its own direction based on the notion that the US economy is further along the down cycle than our counterparts in across the G10. With that said, we should expect to see easing in Fed Funds rate to 1.75%, and may have a slight effect on dollar momentum.Risk Disclaimer: Although every investment involves some degree of risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make an informed decision prior to investing. The material presented here is not to be construed as trading advice or strategy. ACMUSA makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change.