Bank of Canada cuts Rate 75bp to 1.5%
10/12/08 06:48
BoC cut its policy rate by 0.75% to 1.5% (0.5%
expected), the lowest level in 50 years.
The new US 4-week Treasury bills were sold at a high rate of 0% and rate of 3-month Treasury bill briefly traded in the negative territory.
The US government and Congress were negotiating terms for emergency loans that could give taxpayers an equity stake in the US automakers.
US equities retreated after two days of big gains, on the profit warnings from FedEx and other companies. Dow fell 242.85 points (2.72%) to 8691.33 and S&P500 gave up 21.03 points or 2.31% at 888.67. Transportation stock led the pull-back, with Fedex plunged 14.5% after saying its 2009 profit would fall shy of estimates.
Markets were also rattled by an extraordinary sale of US Treasury bills which saw an unprecedented 0% rate. This highlighted the dysfunctionality in the money market as banks are unwilling to absorb new deposits from other banks and agencies and would rather pile it into equivalent maturity treasury.
The new US 4-week Treasury bills were sold at a high rate of 0% and rate of 3-month Treasury bill briefly traded in the negative territory.
The US government and Congress were negotiating terms for emergency loans that could give taxpayers an equity stake in the US automakers.
US equities retreated after two days of big gains, on the profit warnings from FedEx and other companies. Dow fell 242.85 points (2.72%) to 8691.33 and S&P500 gave up 21.03 points or 2.31% at 888.67. Transportation stock led the pull-back, with Fedex plunged 14.5% after saying its 2009 profit would fall shy of estimates.
Markets were also rattled by an extraordinary sale of US Treasury bills which saw an unprecedented 0% rate. This highlighted the dysfunctionality in the money market as banks are unwilling to absorb new deposits from other banks and agencies and would rather pile it into equivalent maturity treasury.
Meanwhile, it seems like the US government would have to take on significant equity stake in the US automakers. Fed Chairmen Bernanke also said the Fed would be reluctant to lend to auto makers particularly if Congress had decided against such action. Chrislori.com believes the rescued plan will only postpone the inevitable. More bad news to come on a multitude of fronts in the new year, which will drive USD and JPY higher.
JPY: Oct core machinery orders fell -4.5% m/m and -15/5% y/y (vs -3.9%/-15.0% cons, +5.5%/-4.2% last). USDJPY deals from 92.35 to 92.55 high after the machinery orders data and the Nikkei opening higher. Technically, this remains a choppy downtrend. 91.60-92.60 range in the wider 90.90-93.10. Offshore unlevereaged accounts continue to add to JPY longs on USD rallies.
GBP - Bombarded by consistently poor economic datapoints (soft IP, manufacturing, trade data) and BoE Sentence speech that Central Bank needs to pay more attention to money and credit rather than solely focusing on the aggressive interest rate accommodation. A break below 1.4680 opens the gate for a direct retest to 1.4470. Otherwise 1.4680-1.4910 with 1.5050 a near term discernible lid. GBP will likely continue to weaken in the longer term, but at a slower pace.
EUR: Overnight, the ZEW economic sentiment provided a small upward surprise to the market as it improves to -45.2 from -53.5, while the German trade data also improved to EUR 15.8bn from EUR13.7bn. EURUSD test the 1.3000 level as the European bourses outperformed the US ones and the huge government spending expected from the US in the months ahead limiting the appeal of USD against EUR. The thin liquidity also helped the technical rally. 1.2890-1.3000 to reign intraday.
AUD - No strong bias although we have been seeing a steady stream of AUDJPY buyers the past 20hoursAn inside trading day in AUDUSD keeps price actions dull. 0.6690/00 the topside pivot while 0.6295-00 the initial fulcrum. Economists are calling for sub .60 AUD, likely as a victum of USD strength.
CAD: BoC cut its policy rate to the lowest level in 50 years at 1.5%, and signaled its willingness to do cut below the current 1.50%
Gold: Crude oil and the euro pretty much determined intraday direction with very little gold-unique interest around. The highs came when EURUSD touched the 1.30 handle but didn't last long. For now, gold appears content to range trade between 760 and 790.
US Today : MBA Mortgage Applications, Wholesale Inventories, Monthly Budget Statement.