U.S. Dollar Trading (USD) stocks soared in the last hour of US trade on a UK guardian report that France and Germany had agreed to increase the EFSF to EUR2 Trillion to help safeguard against debt contagion. US Stocks soared and risk appetite picked up leading to USD selling on most pairs. In US stocks, DJIA +180 points closing at 11577, S&P +24 points closing at 1225 and NASDAQ +42 points closing at 2657. Looking ahead, September CPI forecast at 0.3% vs. 0.4% previously m/m. Also released, September Housing Starts forecast at 0.59mln 0.571mln.
The Euro (EUR) continued selling in Europe saw the EUR/USD below 1.3700. The mood changed dramatically after a report in UK guardian that France and Germany had reached an agreement. This deal was denied a few hours later but the Euro was already back above 1.3800. Selling did come back into the frame however after Moody’s downgraded Spain in line with the other two rating agencies. German October ZEW slumped to -48 vs. -43 forecast.
The Japanese Yen (JPY) was range trading Y76.70-Y76.90 with the action kept to the crosses with the downside tested on EUR/JPY and AUD/JPY before reversing sharply on the EU deal talk.
The Sterling (GBP) September CPI came in hot at 5.2% vs. 4.9% previously. The potential for the Bank of England to raise rates to counter inflation is limited because of the weakness in the UK recovery. The GBP/USD rallied late in the US session with the other majors as the market reacted to the EU news. Looking ahead, October MPC Minutes forecast at 9 unchanged.
The Australian Dollar (AUD) the AUD/USD was volatile hitting support at 1.0100 before rallying back to 1.0300 at the height of the US stock market reaction to EU debt deal news. The Chinese GDP earlier in the day missed slightly at 9.1% vs. 9.3% forecast.
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