Fundamental Headlines • U.S. Throws New Lifeline to AIG, Scrapping Original Rescue Deal – Wall Street Journal • Citigroup in Talks to Buy a Bank – Wall Street Journal • China authorises ‘massive’ stimulus package – Financial Times • HSBC Sets Aside Additional $4.3 Billion for U.S. Loan Losses – Bloomberg • Nortel Posts $3.4 Billion Loss, Cuts 1,300 Jobs as Customers Pare Budgets – Bloomberg • GBPUSD – The U.K. producer price index slipped 1.0% in October as fears of a severe recession led producers to lower prices by the most since 1986. As a result, the annual rate dropped to 6.8% from 8.5% in September, followed by a 0.6% decline in the core measure for inflation. The significant decline supports the Bank of England’s unexpected 150bp rate cut last week as they deemed the significant reduction essential to meet the 2% target for inflation, and suggests that the central bank may continue to aggressively lower borrowing cost over the coming months as Europe’s second largest economy heads into a recession. Discuss the topic and your trade ideas in the GBP/USD Forum. • EURUSD – Investor confidence in the Euro-Zone plunged to -36.4 from -27.8 to reach its lowest level since recordkeeping began in 2002. A breakdown of the report showed that investors are becoming increasingly pessimistic about the future as expectations slipped to -42.8 from -41.0, and sentiment among investors may weaken further over the coming months as the Euro-Zone teeters on the brink of a recession. Despite the extraordinary efforts taken on by policy makers all over the world, financial conditions remain unfavorable, and may face further headwinds over the coming months as fears of a global meltdown intensify. Meanwhile, market participants expect the ECB to cut the interest rate yet again as President Trichet continues to hold a dovish outlook, but could be force to ease policy well into the next year as the downside risks to growth heighten. Discuss the topic and your trade ideas in the EUR/USD Forum. • USDCHF – Consumer confidence in Switzerland slipped to its lowest level since 2003 as the SECO index plunged to -27 from -17 in July. The gloomy outlook held by consumers suggests that the domestic economy may weaken further as private-sector spending accounts for nearly two-thirds of GDP, and may lead the Swiss National Bank to ease policy further in the months ahead in order to avoid a severe downturn. Meanwhile, fears of a global recession has certainly become a growing concern for the SNB as they unexpectedly lower the 3-month LIBOR rate by 50bp last week, and is likely to lower borrowing costs even further as the central bank expects the economy to contract in the next year. For more news and resources, visit the new Swiss franc Currency Room.
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