The USD continued to trade weaker in European trading as the Fed's surprise quantitative easing announcement sank in and traders expressed concerns that the flood of liquidity would erode the value of the USD. Commodity prices continued to gain ground on the hope that the Fed's move would stabilize the world's largest economy and with it demand for raw materials. Oil prices rose over $50/bbl for the first time since early January.
EUR/USD broke over the 1.3520/30 level and quickly moved up to the 1.3630 area. USD/JPY fell as recent lows at 95.70 were breached, sending the pair as low as around 94.50 by the NY open. Other major currencies similarly surged higher against the USD. The key cross-currencies were largely stable as most of the action was concentrated on pressing the greenback lower. Gold prices were firmer, but relatively stable after posting a massive rebound following the Fed's announcement on Wednesday afternoon, trading around the 930/950 area overnight. US Treasury yields look to have stabilized around the lows seen following the Fed decision, with the 10-year Treasury note yield hovering around 2.50%.
The Fed's move was both bold and aggressive, and while the initial reaction has been to hammer the USD, there is speculation growing that the ECB will now be forced to follow the quantitative easing plans of the Fed, BOJ, BOE and SNB. In the short-run, however, the USD downside looks set to remain under pressure.
Upcoming data releases:
3/19/2009 12:30 CA Int'l Securities Transactions JAN -2.835B - -
3/19/2009 12:30 US Initial Jobless Claims 14-Mar 654K 650K
3/19/2009 12:30 US Continuing Claims 7-Mar 5317K - -
3/19/2009 14:00 US Leading Indicators FEB 0.40% -0.60%
3/19/2009 14:00 US Philadelphia Fed. MAR -41.3 -39
3/19/2009 14:30 US Fed's Tarullo Testifies on Bank Regulation 19-Mar
3/19/2009 16:00 SZ SNB Governing Board Member Thomas Jordan Holds Speech 19-Mar