London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Sep 08 08 12:08 GMT |

The USD was bid in a big way in London trading as news that the US government will place the two major mortgage GSE under a government conservatorship (de facto nationalization) has sent stock futures surging and US bond yields more than 10-14 bps higher. EUR/USD was sold into a London close near 1.4220, shedding just over -190 pips in the session. GBP/USD saw an even more impressive selloff, plunging more than -290 pips in London trading towards the 1.7630 area. Oil prices retreated about $1.50 towards the $107.40 area despite the change in Hurricane Ike’s path that has the Gulf of Mexico as a final destination now. Hurricane Ike is expected to be in the Gulf by early Thursday as a category 2 hurricane (105mph winds), though is forecast to strengthen to a category 3 (115mph winds) as we head into the weekend. The risk remains that the hurricane strengthens more than expected, causing large evacuations in oil facilities and shutting down vast amounts of production. This would likely see oil test the 200 day SMA which sits at $111.55 and has proven to be a vital trigger for sharp price movements. With the absence of major economic data out in the NY session, the markets will likely be tuned to the evolution of the GSE decision and its continued impact on markets. Stocks are likely to remain bid, led by financials, as this de facto bail out eliminates some uncertainty in the credit and mortgage markets. The continued strength in US equities should prove bullish for JPY crosses and we would look for USD/JPY to retest the 109.00 area. Also watch Loonie as the progression of Hurricane Ike should dictate the price action in oil markets and commensurately USD/CAD. Upcoming Economic Data Releases (NY Session) Prior Estimate 9/8 12:01 GMT NZ New Zealand Manpower Survey 4Q 12% - - 9/8 12:30 GMT CA Building Permits MoM JUL -5.30% -0.50% 9/8 14:01 GMT AU Australia Manpower Survey 4Q 20% - - 9/8 15:01 GMT JN Japan Manpower Survey 4Q 20% - - 9/8 17:00 GMT US Fed's Fisher Speaks in Austin at Community Forum 8-Sep 9/8 17:00 GMT US Federal Reserve's Fisher Speaks in Austin, Texas 8-Sep 9/8 19:00 GMT US Consumer Credit JUL $14.3B $9.0B Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.