The European Central Bank cut the benchmark interest rate by 50bp to 3.25% from 3.75% as widely expected. Following the rate decision, ECB President Trichet is scheduled to hold a Q&A session at 13:30 GMT, and the comments by the central bank head could spur increased volatility in the forex market.
Fundamental Headlines • Asian Investors 'Accumulate' Big Losses on Risky Contracts – Wall Street Journal • Wells Fargo to Sell $10 Billion in Stock – Wall Street Journal • Toyota slashes outlook as global crisis bites – Financial Times • Citigroup, Goldman Said to Begin Eliminating Jobs – Bloomberg • Russia, Korea Lead Drop in Emerging-Market Stocks, Ending Rally – Bloomberg • EURUSD – The European Central Bank cut the benchmark interest rate by 50bp to 3.25% from 3.75% as expected, and certainly leaves the door open for further easing in policy as the economy teeters on the brink of a recession. Meanwhile, German factory orders slipped to its lowest level on record as the index plunged 8.0% from August. In addition, orders were 2.7% weaker than in the previous year, which suggests that Europe’s second largest economy may have slipped into a recession in the third quarter. A breakdown of the report showed that domestic demands declined 4.3%, while export orders fell 11.4%. The slowdown in the global economy has certainly taken a toll on businesses, and the ECB may opt to increase their efforts in order to avoid a severe downturn in the economy. Discuss the topic and your trade ideas in the EUR/USD Forum. • GBPUSD – The Bank of England unexpectedly lowered the key interest rate by 150bp to 3.00% despite expectations for a 50bp cut. The historical rate cut certainly suggests that conditions have deteriorated considerable since their last meeting, and has raise speculation that the MPC may ease policy further over the coming months as Europe’s second largest economy slips into a recession. Meanwhile, U.K. home prices fell to a record low in September as the HBOS index slipped 2.2% from the previous month. On an annual basis, home values reached its lowest level since recordkeeping began in 1983 as home values dropped 13.7% from last year. Discuss the topic and your trade ideas in the GBP/USD Forum. • USDCHF – The Swiss National Bank joined the Bank of England and lowered its 3-month LIBOR target range by 50bp to 1.50%-2.50% following the coordinated rate cut on October 8th. The central bank stated that the growth prospects have deteriorated significantly since their last meeting, and noted the economy may contract in 2009. The commentary following the decision suggests that economic activity throughout Europe will weaken further over the coming months, and may lead European policy makers to take addition steps to avoid a global meltdown. For more news and resources, visit the new Swiss franc Currency Room.