U.S. Session Recap – June 6, 2014

  • ECB implements negative deposit rates, cuts refinancing and marginal lending rates
  • ECB cuts 2014, 2015, and 2016 inflation forecasts and cuts 2014 GDP forecasts, but raises 2015 GDP estimates
  • ECB: “We’re not finished.”
  • US initial jobless claims up to 312K vs. 310K expected and 304K previous
  • US Challenger job cuts up to its highest level in more than a year
  • CA building permits up by 1.1% vs. 4.2% expected and 3.2% decline last month
  • CA IVEY PMI clocks in at 48.2 vs. 56.0 expected and 54.1 previous

Traders were expecting explosive price action from yesterday’s events and the tier 1 reports didn’t disappoint!

The main feature of the U.S. trading session was the market reaction to the ECB’s latest policy decisions. Not only did Mario Draghi and his gang cut their rates across the board and announced more easing plans, but they also cut inflation and growth plans. Yikes!

The euro first took hits when the ECB announced its slew of rate cuts. Fortunately for the common currency, the central bank had also decided to disclose more details in Draghi’s press conference, which was a couple of hours after the decision’s release. And when it became clear to investors that Super Mario wasn’t going to add more easing measures, the euro soon erased most of its intraday losses. Phew!

EUR/USD fell by almost 150 pips in the first two hours before it found support at 1.3500. Ditto for EUR/JPY, which fell by 113 pips to 138.68 before closing just below 140.00. EUR/CHF didn’t show such intraday reversal though, as it slipped by 34 pips to 1.3172 and stayed around that level.

With the ECB implementing negative deposit rates and the Fed and BOJ implementing low interest rates, search for yields became the name of the game.

High-yielding currencies were some of the strongest gainers with AUD/USD closing at .9339, almost 50 pips higher than its session open price and NZD/USD jumping by 50 pips to .8500 throughout the session. The Loonie even shrugged off weak Canadian data as USD/CAD encountered resistance at 1.0960 and closed at the 1.0925 area.

Only Australia’s AIG construction index released earlier and Japan’s leading index scheduled at 5:00 am GMT are on tap in today’s Asian session trading. Look out for possible continuation, retracement, or reversals of yesterday’s moves!

See also:

London Session Recap

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