Light Trading as Market Awaits Closure of Fed Bailout Proposal
Light Trading as Market Awaits Closure of Fed Bailout Proposal
The Usd was mostly flat in the US trading session as the majority of the market anticipates the outcome of the Fed Bailout proposal, as this bill is delayed following party contentions. The EurUsd is marginally higher, up a little over 10 pips at the low range of 1.46, while the UsdJpy declined 50 pips to the low 106 level. The GbpUsd saw minimal gains rising 30 pips trading through intraday resistance to 1.84. The equity markets opened lower, but have since moved back to levels near yesterday’s close. Commodities were mixed as precious metals are becoming a flight to quality asset, due to historically tight yields. Oil is slightly lower trading at 105 down 2% on the day, while gold holds strength at 883. Bond yields tightened substantially with the 2yr seeing a retraction of 13bps, and the 10yr 4bps.
Further commentary from the ECB confirmed that the Eurozone slowdown will last for an extended period of time. German CPI declined less than expected at -0.1% vs. -0.2% est. this will have an adverse affect on the consumer as prices will need to decline further to lift current weak levels of demand. The BoE followed a similar trend as the US by injecting 40bln Gbp into money markets earlier this week. In addition, the central bank admitted the country was in a mild recession, one of which is not as severe as the previous three. With the current turmoil in the market a key question for Traders is to determine whether the downturn in the UK is fully priced into the cable. We hold a bearish stance in the long-term, but with the recent turn of events in the US we are likely to see interim strength in the GbpUsd over the next 3 months.
Washington Mutual, the US largest saving bank was seized by the FDIC and purchased by JP Morgan Chase for $1.9bln, following a previous bid for the bank of $7bln, a year ago. The consolidation of the US financial sector sets the stage for a new landscape in the overall markets. The combination of the delay in the Fed bailout bill, and the fall of an additional bank, the Usd is poised to serious declines over the next month.
AC Markets
http://www.ac-markets.com
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.
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