Today’s USD Trading

• USD quiet in Asia, firms in Europe

• GBP and EURO rally after rate cut

• Whipsaw in the majors

Today’s Economic Reports

All times EASTERN (-5 GMT)

• 8:15am ADP Private Payrolls, Actual+ 10,000

• 8:30am Advance GDP q/q 0.2%0.6%, Actual +0.6, -0.2%

• 8:30am Advance GDP Price Index q/q 3.0%2.6%

• 8:30am DECI q/q 0.8%0.8%

• 9:45am Chicago PMI 47.548.2 Actual 48.3

• 2:15pm FOMC, actual 25 BP cut

Looking Ahead to Thursday

All times EASTERN (-5 GMT)

• 7:30am Challenger Job Cuts y/y 9.4%

• 8:30am Personal Spending m/m 0.2%0.1%

• 8:30am Core PCE Price Index m/m 0.1%0.1%

• 8:30am Unemployment Claims 363K342K

• 8:30am Personal Income m/m 0.4%0.5%

• 10:00am ISM Manufacturing Index 48.048.6

• 10:00am ISM Manufacturing Prices 83.583.5

• 10:00am Construction Spending m/m -0.8%-0.3%

USD two-way again, GBP rallies back, Fed cuts

As expected the FOMC cut interest rates 25 BP today and changed the wording of the statement suggesting that the Fed is taking a more neutral course in the coming months. Analysts are debating that the Fed would like to see the effect of both the new liquidity windows and the government rebate-stimulus package before weighing in on further rate cuts. The Fed made clear that it is still considering the inflation pressures seen recently and the bottom line to the rate cut is a wait and see attitude. In response the USD whipsawed trader’s on the news; initially rising against some pairs and then getting slammed later. Traders note that the rally in GBP as well as EURO are knee jerk responses to trade volatility and don’t expect a serious change in trend; most agree the USD squeezed weak longs initially. For the record, the GBP rallied on news starting this morning as other US news was not USD friendly but popped higher on stops and short-covering above the 1.9800 handle for a high print at 1.9897 before finding offers at technical resistance around the recent developing down trend. Traders note that cable has been exceptionally volatile the past several weeks and today was no exception; if the rate follows suit the next 24 hours we should see a return to the 1.9600 handle by the end of the week. EURO rallied initially on the news for a high print at 1.5645 and looks set to continue higher but offers in the 1.5650 area and 1.5680 area are said to be getting thicker so this rally off the lows may be a dead-cat bounce. Look for a lack of follow-through overnight. USD/JPY broke under the 104.00 handle in heavy trade for a low print at the 103.68 number at last look; traders note that the rate has had good selling from CTA types and exporters around the 104.60/80 area this morning. USD/CAD and Swissy also taking their lumps but not nearly as aggressively as other pairs; OK to hold open shorts across the board and let the overnight action work for us. Tomorrow is a light day for news so expect a rotation in the USD; especially against GBP.

Analysis by: written by Jason Alan Jankovsky


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