Global recessionary fears dominated the market headlines in the Wednesday session, with US equity bourses posting steep losses, crude oil slumping beneath the $70 per barrel level to $67.12 and spot gold at a one-year low to $774.57 per ounce. The greenback and yen benefited from continued safe-haven flows, posting steep gains versus the euro and sterling.
The dollar surged to 1.2737 against the euro for the first time since November 2006. Although the FOMC will likely cut rates by 50-basis points to 1.0% when it meets next week, markets anticipate more aggressive policy easing from the ECB in the near-term to support the struggling economy.
The pound traded near its lowest level in more than five years against the dollar as reports showed declining retail sales and home-loan approvals, adding to evidence the U.K. is on the brink of a recession.
The pound slid after the Office for National Statistics said retail sales fell 0.4 percent in September from August and the British Bankers' Association reported a 57 percent slump in mortgage approvals last month compared with a year earlier.
``The line of least resistance is a weaker pound in a generally dollar-bullish environment,'' said Russell Jones, head of fixed-income and currency research in London at RBC Capital Markets. ``The pound came a long way. That's quite a rare occurrence.''
The euro declined as ECB's Gonzalez-Paramo told the Irish Independent newspaper in an interview today the bank expects ``inflation to come down more quickly than a month ago as a result of slower growth, lower commodity prices.''
The currency advanced for a seventh day as on bets the European Central Bank will favor interest-rate cuts to support the 15-nation economy. The Wall Street Journal reported the U.S. may spend $40 billion to prevent more home foreclosures, citing a person familiar with the plan. The yen trimmed gains as U.S. stock futures climbed and Asian stocks pared losses.
EUR/USD it was consolidated within the limits of $1,2720-$ 1,2855. Offers $1.2850/60, $1.2920. Bids $1.2780, $1.2720/00.
GBP/USD has become stronger from area of a session low on $1,6155 in area $1,6330 then has again decreased in area $1,6170.
USD/JPY having established a session low on Y96,83, the pair has receded in area Y98,20. Later the rate has again receded below level Y98,00.
US data starts at 1230GMT with the weekly jobless claims, which are expected to rise 9,000 to 470,000 in the October 18 employment survey week. There were 458,000 claims in the September 13 employment survey week. That is followed by further US data including the OFHEO Home Price
Index at 1400GMT, the weekly natural gas stocks at 1435GMT and M2 Money Supply at 2030GMT.