Forex Investment and Currency Trading

Yesterday saw two major central bank events pass without huge surprises. The FOMC meeting
delivered a somewhat less dovish tone than the market had expected – but still provided a relatively firm signal that policy is firmly on hold for an extended period. The ECB’s widely anticipated 1-year financing operation saw a very large subscription of EUR448bn (though not as large as some of the more aggressive estimates floating around the market beforehand) and some downward pressure on front-end rates as a result. Analysts expect short-dated Eurozone borrowing rates to continue to grind lower in the next couple of months.

Equities managed to close the day in the black after Monday’s large drop (with cyclical stocks making up decent ground) but stocks had been higher on the back of the better than expected durable goods report. The price action post-FOMC was broadly consistent with a mildly more hawkish statement: equities down, bonds lower and the USD stronger. The other notable mover in the day was EUR/CHF which has continued to grind higher amid rumours of intervention (a busy day for central banks, all in all). The SNB seems serious in its desire to prevent further CHF appreciation and SNB member Jordan’s comments last week should not have been seen – as some did – as lessening that commitment.