Global Coordinated Rate Cut Does Little to Stabilize Markets
Global Coordinated Rate Cut Does Little to Stabilize Markets
The Usd was mixed in the early trading session following a series of rate cuts from central banks in Europe and Asia. The EurUsd gained roughly 80 pips to the mid range of 1.36, while the UsdJpy fell below the 100 level for the first time since March of this year. The GbpUsd fell 100 pips, trading with a 1.73 handle. The Equity markets are negative in the US and Europe despite efforts by central banks to create stability. Bonds yields continue to tighten with the 2yr at 1.4% and the 10yr at 3.5%, which is representative of the increasing risk aversion in the marketplace. Commodities followed suit, with gold trading at $907, up 2% on the day, and oil compressed at $89 down about 1%.
The ECB participated in a global effort to stabilize the financial system through cutting rates. The ECB lowered the refi-rate 50bps to 3.75%, which was in tandem with 6 other central banks. The Euro recovered some losses following talks that additional intervention will be taken to address the financial crisis. The UK took similar action cutting rates 50 bps to 4.50%, the cable slipped on the rate reduction, which was probably necessary regardless of the current situation in the financial sector. The economic conditions in the UK are deteriorating rapidly, and some form of easing in monetary policy was becoming more and more necessary. Our outlook for the Sterling is bearish, with a trading range between 1.74-1.70.
Volatility continues to reach record highs with the VIX trading above $58 on jittery market conditions. The dollar is likely to see more adversity in coming days as the fundamentals are not in place to carry momentum beyond the 1.30 level. The situation in Europe and Asia has given the dollar an artificial boosts, but the global economy is suffering a uniform slowdown. The Usd should trade strong against the majors, but lose steam when the markets return to rationale.
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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