Forex Update
The USD is higher vs. most major currencies after selling off yesterday, following the 50bp Fed rate cut. The greenback softened somewhat following the weaker-than-expected Chicago PMI release as EUR/USD bounced off an intra-day low of 1.4804 and has since traded within a narrow 40-pip range.
The ECB is expected to leave rates unchanged at 4%, which would give the ECB a 1% benchmark yield advantage after having had a 25bp disadvantage the beginning of last week. Currently Fed Fund futures show a 70% chance of an additional 50bp cut mid-February.
Analysts are generally expecting a 25bp BOE rate cut next week; 3-month rate futures in the UK show an implied rate of 5.34%, which hold a 64% chance of a 25bp cut. Cable is up 0.1% to 1.9885. GBP/JPY is up 0.25% and EUR/GBP is down 0.2%.
USD/JPY bounced off of early-morning sluggishness as the rally in equities picked up steam. USD/JPY is up 0.15% to 106.48. EUR/JPY is flat. USD/CAD is up 1.06% to 1.0035 after dropping below parity yesterday.