A rather docile night of currency trade was flipped on its head as major announcement early in the US session saw risk assets well and truly back on the table. Six central banks including the Federal Reserve, the European Central Bank, Bank of Japan, Bank of Canada, Swiss National bank and Bank of England made a move to provide liquidity for to global debt markets by lowering the cost of dollar swaps. The move in effect is a 0.5% cut for Governments to swap Euros for US dollars which are then on lent to their domestic banks, this to encouraging banks to lend to each other boosting liquidity in short term money markets. The market responded in kind to any major rate cut with the US dollar heavily sold off with the Australian dollar nudging past 1.03 US cents, rising 3 cents in the space of 6 minutes as the Aussie moved back to where it was trading two and a half weeks ago. All traded risk currencies, commodities and equities reflected the move immediately with gold picking up $30 an ounce, WTI oil back above $100 a barrel, the Dow Jones up 3.23%, German Dax, up 4.98% and UK FTSE up 3.16%.
On top of coordinated central bank move was a hodgepodge range of economic releases, in Europe we had unemployment tick up to 10.3 precent, yet we had German unemployment drop and their retail rise to 0.7% versus prediction of 0.1%. Then over in the States we a another surprise outperformance with ADP Non-farm employment change showing a gain of 206,000 with estimates for a gain at 131,000 and this being the highest print since March this year. Although they are not perfectly correlated if we look to March's Non-farm payroll print of 192,000, current predications for Fridays print are around 119,000 which gives those planning to trade the event food for thought.
Obviously after such a bumper night in equities expectations would be for a solid performance by local and Asian equity markets. This should underline the Australian dollar which sits just below 103 US cents, yet with retail sales and building approvals due for release at 11.30 and Chinese manufacturing PMI data hours later the day should be quite volatile. For those jumping on a plane to Europe for Christmas the Aussie dollar is buying 76.51 Euro cents highs last seen in early September.