Thu, 02 Dec 2010 22:13:00 +0100

Day Wrap-Up: Euro keeps reacting to the upside, ECB unhurried on bond buying

FXstreet.com (Barcelona) - Asian traders contemplated a parsimonious session, cautious ahead of the ECB announcement later on the day. A spontaneous pick up in bearish momentum was observed in Aussie crosses, after the Australian economy released a worrying 1.1% drop in retail sales QoQ. A trade balance better than expected at $A2.6 billion offset somewhat the decline. The rise in volatility fizzled out rather quick.

Japan’s Q3 Capex came out strong at +5%. Gold stood at $1392/oz, well bid. Light profits taking weighed in risk traders, underpinning a slight improvement in USD and JPY. EUR/USD tested 1.3100, GBP/USD muted, USD/JPY drifted lower to 84.00. Regional stock markets were launched over 2% higher, Nikkei +1.75%, Shanghai +1.5%, Sydney +1.8%. AUD/USD was capped below 0.9650.

The European session was one of a fast-pace, even prior to the ECB 2-day meeting report. UK Nov. construction PMI stood at 51.8 vs 51.6 in Oct. Swiss GDP in Q3 leaped past forecast at 0.7%, while retail sales in line with Aussie one, disappointing at 3.5% vs 4.9% expected. EU GDP unchanged at 0.4% QoQ, 1.9% in Q3 (YoY). A decent Spanish bond auction animated Euro bulls. Stocks were boosted beyond too, with FTSE-100 at 2.22%.

ECB's Trichet finally came on stage, with all market eyes on him. The Central Banker called for rates to stay uncharged at record lows of 1%, while it continued to denote the elevated uncertainty in financial markets. He made no mention to any new large scale bond buying program, so far not following the path from its counterparts Fed or BoJ. With that possibility off the table, markets reacted accordingly, and Euro got sell-off on the news.

In the US, initial jobless claims rose mildly to 436K ahead of tomorrow's big NFP announcement. On the housing sector, pending home sales activity picked up massively, after a 10.4% jump in Oct. The last session of the day developed an interesting risk on mode, partly fueled by the data just mentioned.

The Euro recouped its early losses to end above 1.3200, AUD/USD rose back to retest neckline above 0.9750, USD/CHF, on the contrary, was heavily sold just below 0.9900. GBP/USD whipsawed all day long, to end up in an inconclusive stance, back at 1.5600. USD/JPY was rattled to 83.50 area, eventually knocked back up near 84.00. Gold pared losses from near $1,400.00 to $1,385.00. In Wall Street, the Dow and S&P 500 climbed 0.95% and 1.23% respectively.