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CHF moved lower against euro and sterling following today’s rate cuts from the ECB and the BoE. Sterling profit taking after the BoE’s 1% cut saw GBP/CHF move briefly above 1.7800, where modest size selling pressure was noted. Meanwhile, EUR/CHF traded back in to 1.5350 before it edged lower. Both crosses are modestly higher compared with European morning lows, which came amid pre-rate announcement short positioning. From here, movement will be highly correlated with equity markets, which are currently modestly lower. Elsewhere, USD/CHF maintained its safe haven bid and traded up to 1.2188 during the European morning, but was rebuffed by option related accounts ahead of mooted 1.2200 option barriers.

The dollar showed little reaction to the dip in initial claims, as continued claims post their highest levels since December of 1982. USD/JPY has been under some pressure on the back of U.S. equity futures, which fell to session lows following Target stores poor sales showing. EUR/USD meanwhile, has remained remarkably steady following the earlier ECB 0.75% rate cut.

EUR/USD edged higher after ECB cut rates by 75 bp to leave its refi rate at 2.5%, with lending and deposit facilities now at 3.00% and 2.00% respectively. The pair edged up to 1.2645-50 versus 1.2620 ahead of the announcement. The impact is muted ahead of the accompanying press conference, which is due at 13.30GMT. There remains potential for more downside tests given the narrowing rate differential with the U.S., although recent moves in to the 1.2500-50 area have been well supported. There has been a stream of quasi-official demand and central bank reserve management activity, which has negated any negative impact from deteriorating fundamentals.

The euro and sterling both came under pressure ahead of today’s rate decisions from the BOE and the ECB.

Market speculation of more aggressive rate moves were heightened after the Riksbank shocked the market with a 175bps cut to 2.00%.

Cable dived to hit 1.4471 trend lows and EUR/GBP hit new all time highs of 0.8692, with many now positioning for a 150bps cut from the BOE. EUR/USD followed Cable price action and traded as low as 1.2548 before an Asian reserve manager put a floor in place.

The market is looking for a move of at least 50bps from the ECB, with some erring towards 75bps. Elsewhere, JPY and USD maintained a supportive tone, with the market favouring risk aversion. Meanwhile, the CHF traded at firmer levels, but was unable to sustain gains due to good USD/CHF buying interest.

EUR/USD slumped to hit two-week 1.2548 lows as short term speculative accounts and leverage funds positioned for aggressive ECB rate action later today. The pair currently trades just at 1.2605.

The surprise Riksbank 175bps rate cuts fueled good selling pressure, which saw good quasi-official bids filled in between 1.2650 and 1.2600 and stops were triggered on the way down to the lows.

An Asian reserve manager put a floor in place, which encouraged some intra-day euro shorts to take profit and forced a move back in to 1.2600. EUR/JPY traded as low as 116.36 and EUR/CHF hit 1.5284 lows, but both crosses have recovered their poise and trade above 117.00 and 1.5300 respectively.

GBP has steadied out after its losses accelerated on Halifax house prices. November prices fell 2.6% m/m and 14.9% 3m y/y, which was much worse than expected.

Cable filled in bids in to 1.4500 and triggered another round of stops to hit 1.4471 lows, but has recovered to trade at 1.4547.

EUR/GBP edged up to 0.8675 all time highs and now trades at 0.8660. 

Market participants note a good size Cable option strike at 1.4500 today, which could be a factor, although price action should remain highly volatile over the BoE release, with the market now split between a 100 bp or a 150 bp rate cut.