FX Markets Rangebound After 50bps Cut by ECB

Daily Forex Fundamentals | Written by AC-Markets | Jan 16 09 01:19 GMT |

Market Brief The trend of dollar strength persists due to the resurgence of the risk aversion trade. The EurUsd slipped 50pips to the low range of 1.31, while the UsdJpy rose a bit over 80pips testing 90 as a resistance level. The GbpUsd moved slightly lower at the mid range of 1.46, up only 38 pips in light trading. Equity markets were flat in the US, and marginally negative in Europe with both the Dow and SPX up less than 1%. Commodities were very active in today’s session, gold tested $800oz as a support level but has since recovered. Bond yields were mixed, but the 2yr may breach 0.7% putting the interest rate at an extremely low level. The ECB lowered rates 50bps to 2.00%, which is the lowest rates have been on record. President Trichet stated that they are satisfied that inflation levels are below their target of 2.00%, but he also hinted that their next meeting should be uneventful. This may be a grave mistake as the ECB seems to be way behind the curve in terms of increasing systemic risk within the Eurozone economy. Swift aggressive action is needed to thwart a prolonged recession, or even a depression. With sovereign credit on watch on two EU countries, one which was downgraded, the pressure will mount for a coordinated bailout to stabilize the crisis. We expect to see further weakness in the Euro against the majors, particularly the Usd, Gbp, and Jpy. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.