EUR/USD (1.4395) Two of the Fed’s most recent dissenters were on record explaining their actions yesterday, with Philadelphia President Charles Plosser saying that the FOMC decision was inappropriate and that its timing sent the signal that the Fed was in the business of supporting the stock market. Dallas President Richard Fisher later echoed that statement, saying that the central bank shouldn’t ease monetary policy every time there is a big drop in stock prices, and that he believes his FOMC colleagues share the same view. Meanwhile in the eurozone, the two-state summit in Paris on the previous day didn’t leave currency traders with much information to work with, apart from the prospect of a new financial transaction tax. That left the SNB standing alone on Europe’s centre stage yesterday. Unfortunately, the central bank’s performance was unconvincing. Traders drove the Swiss franc some two percent higher versus the euro and the US dollar, just as the SNB announced it would nearly double the amount of liquidity the bank makes available to the money market. After previously announcing its intention to peg the franc to the euro, the central bank appears to have disappointed traders by not acting forcefully enough in yesterday’s intervention.
The euro gave up most of its early gains yesterday, but we nevertheless remain in a bullish strategy with a risk-limit set at 1.4290 and with a target at 1.4810. The trigger for additional near-term gains stands at the 1.4590 supply level.
Market Bias Index
The US dollar remains under slight pressure, although it is barely evident in rescaling of the Market Bias Index. Only the AUD and the CAD are perceived as more undervalued.
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Deutsche Bank
Fixed Income Research – Global