After President Obama’s proposal of a $447 billion package to stimulate growth and the jobs market and a lack of new news from Bernanke as he reiterated the Jackson Hole statement that all policy tools are still available to stimulate the economy, it was down to the new Japanese finance minister Jun Azumi to tell reporters that he will tell his G7 counterparts that his country remains prepared to take ‘bold ‘action in the currency markets when necessary’. That said, the expectation in the market of positive news from the G7 this weekend remain extremely low.
Range: 1.3879 – 1.3937
After the policy mistakes by the ECB, in 2008-2009 it seems history is repeating itself as Jean-Claude Trichet yesterday signalled that after making aggressive hikes just a few months back, these hikes are likely to be reversed. These comments have signalled a 25-basis-point cut, if not 50-basis points by year end. ‘We have significantly changed our appreciation of the economic situation. A month ago we considered risks to growth were balanced, not the case today,’ he said. We are holding just above the July low of 1.3840 but the fact that the market seems to be turning very bearish and pushing through this level, signals 1.3500.
Range: 1.5952 – 1.5991
The short sterling market was disappointed yesterday as the BoE didn’t act to add more stimulus to the economy via QE. This was always going to be unlikely as November seems a better option where we receive the inflation report, thus giving the MPC more time to gauge the incoming economic data for signs of further weaker growth. Today we see PPI numbers released for August but we’re expecting a quite market today with some possible squaring of positions as we head in to the G7 this weekend.