Forex Report
The USD is lower vs. most major currencies just before the FED announces rates this afternoon. Advance Q3 GDP came in at 3.9% annualized, better than the 3.1% expected. Markets are anticipating a 25 BPS this afternoon as the USD achieved new record lows vs. the EUR and in the USD Index. Cable continues to surge higher, up .5% to 2.0785; USD/CAD is down .4% to .95 and USD/JPY is up .5% to 115.19. A 25 BPS cut should yield some more USD selling, however, there is potential for a counter-intuitive USD rally as 25 BPS may have already been built in. If the FED holds the line the USD should take back some of its recent losses and if the FED cuts 50 BPS a USD sell-off is the most likely scenario.
The ECB’s Guy Quaden reaffirmed the ECB’s main concern of price stability as opposed to stability in the forex market. Quaden feels that an extended US economic slowdown would lead to further USD deterioration. The Sept. Euro-Zone annualized employment rate came in higher than expected at 7.3% as did Oct. CPI (y/y) at 2.6%. EUR/JPY is up .72% to 166.66 and EUR/CHF is up .25% to 1.6765.
Oct. Nationwide House prices in the UK came in higher than expected at 1.1%. The higher than expected housing data opens the door for a potential BOE rate hike in the near-term as house prices have increased nearly 10% on a y/y basis. GBP/EUR is up .32% to 1.4372; GBP/JPY is up 1% to 239.44 and GBP/CHF is up .6% to 2.4098.