• The greenback declined on the FOMC statement but later rose against most major currencies after US equities reversed gains and had a selloff in late NY trading. The Federal Reserve, as expected, maintained the target range for the federal funds rate at 0 to 0.25% and upgraded its economic assessment for the US economy. The Fed sees economic activity as having picked up in today's FOMC statement versus just leveling out in the previous statement. The Fed also sees a slow economic recovery with contained inflation and expects to keep rates at exceptionally low levels for an extended period. The dollar index rose to 76.36 after trading below the 76 handle. The S&P 500 declined 10.79 points to 1,060.87. The euro, yen, Swiss franc, aussie, and loonie reversed earlier gains as stocks and risk appetite declined.
  • The GBP/USD rose on today's release of the Bank of England September 9-10 minutes, but reversed earlier gains as US stocks fell in late trading. At the September meeting, the BOE Monetary Policy Committee voted unanimously to keep its quantitative easing program at £175 billion and hold interest rates at a record-low 0.50%. The minutes calmed fears over a possible expansion of the BOE's quantitative easing program. Meanwhile, the Confederation of British Industry sees an end to the UK recession and forecasts 0.3% and 0.4% growth for the final two quarters of 2009. However, the prospects for growth next year will be feeble as the economy continues to feel the effects of the financial crisis and tight credit. The GBP/USD has been trading in a sideways pattern since June. The pair broke its uptrend in August and now looks heavy. Therefore, we are selling the GBP/USD with stop at 1.6760. There are supports in the 1.61 and 1.59 areas and resistances in the 1.66 and 1.67.


Financial and Economic News and Comments

US & Canada

  • The Federal Reserve, while acknowledging that a US economic recovery was under way, signaled that it was too early to hike interest rates. In today's Federal Open Market Committee statement, the Fed said it will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. That means until at least some time in 2010. The Fed also announced that it will buy a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt, adding that the central bank will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. The Fed stated that economic activity has picked up following its severe downturn and conditions in financial markets have improved further, and activity in the housing sector has increased. Regarding inflation, the Fed expects it to remain subdued for some time.
  • US mortgage applications rose 12.8% in the September 18 week after declining 8.6% the prior week, the Mortgage Bankers Association reported.


  • Eurozone industrial new orders rose for a second month in July, rising a more-than-expected 2.6% m/m, after an upwardly revised 4.0% m/m gain in June, data from Eurostat showed. July industrial new orders decreased 24.3% y/y, following July's revised 25.7% y/y drop. Excluding ships, railway and aerospace equipment, industrial new orders advanced 3.1% m/m in July but fell 23.4% y/y.


  • The eurozone composite PMI rose less than expected to 50.8 in September from 50.4 in August, advance PMI data from Markit Economics showed, indicating manufacturing and service industries in the euro area expanded for a second consecutive month. The eurozone manufacturing PMI increased to 49.0 in September from 48.2 in August, indicating the eurozone manufacturing sector contracted at the slowest pace since June 2008. The eurozone services PMI advanced to 50.6 from August's 49.9, showing the first service-sector expansion in 16 months.
  • The German manufacturing PMI increased less than expected to 49.6 in September from 49.2 in August, according to advance PMI data from Markit Economics, indicating the manufacturing sector in Germany contracted at the slowest rate in 13 months. The services PMI unexpectedly declined to 52.2 from August's 53.8, indicating the German services sector expanded for a second consecutive month.
  • UK mortgage lending rose £2.8 billion in August, its highest level since March, after increasing an upwardly revised £1.9 billion in July, the British Bankers' Association reported. Mortgage approvals dipped slightly to 38,095 from July's 38,186. The main high street banks' mortgage lending has stabilized in a market where other lenders are largely inactive, BBA statistics director David Dooks said, adding that loans approved for house purchase have recovered to early-2008 levels, but low levels of customer demand and a limited number of properties coming onto the market will continue to moderate lending.


  • New Zealand's GDP unexpectedly increased 0.1% q/q in Q2 2009, the first expansion in six quarters, after a revised 0.8% q/q decline in Q1, according to data from Statistics New Zealand. The Q2 GDP fell 2.1% y/y, less than market expected.

FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendPositiveNegativeNeutralNegativeNeutralPositiveNeutral
Start Position1.4575N/AN/A1.0385N/A0.6601N/A

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