Euro consolidated losses after a sharp drop yesterday following the ECB rate cut by 0.25 percent to 0.75 percent. This move offers little stability potential and disappointed markets which expected more stimulus measures. What was expected was at least was a return to non-standard policy measures, such as offering another LTRO or reactivating the SMP bond purchase program. These would have provided a better firebreak in the risk of a spreading financial crisis. Yet, no stimulus was announced, despite EU officials pledged sweeping programs and changes to rescue efforts at the EU Summit last Friday. EURUSD fell to a one-month low of 1.2363 late yesterday and hovered around that level in the Asian session.
Sterling fell back down after the Bank of England adopted more QE and decided to increase their gilts purchases by GBP50 billion to bring the program up to GBP375 billion. Yet, this is neither significantly detrimental nor encouraging to the pound. Also the ECB move dampened risk appetite. GBPUSD fell to a low of 1.5499 by late Thursday where it consolidated in Asia this morning.
Dollar is consolidating gains against the yen after surging from a better-than-expected reading of ADP payrolls which rose to 176,000. USDJPY hit a high of 80.08 following the news yesterday, and held onto those gains in the Asian session this morning. The pair is expected to trade sideways ahead of the much anticipated NFP (non-farm payrolls) report due later in the U.S. session today. The forecast is for 95,000 jobs added to U.S. payrolls in June. The previous 69,000 increase in jobs in May, reported on June 1, was the weakest growth in a year.
Aussie was the best performer after the second move to ease the benchmark rate in China in a month (and before that, not since 2008). The fact that Australia’s biggest trade partner is trying to support growth, helped lift AUDUSD to a new two-month high of 1.0327 yesterday. Some profit taking eased the pair to 1.0242.