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Forexlive Americas FX news wrap: ECB raises rates by 75 basis points

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The ECB raised rates by 75 basis points to 2.00%. However, the comments from Lagarde at her press conference did not really convince the markets the she was “all in”. Yes, she put on her “we have to do more” face, but she didn’t go too far out on the limb with any “kill inflation now” rhetoric.

  • We have to do additional rate increases
  • The pace of hikes will be determined meeting-by-meeting and be data dependent
  • Did not discuss substantive APP issues today
  • We stil have ground to cover on normalization
  • The ultimate destination is the rate that will deliver 2% inflation in the medium term
  • It might well be ‘several meetings’ but it will be determined meeting by meeting

Later in the afternoon, there was the usual “sources” headlines that said the 75 bps hike wasn’t unanimous and that three doves only wanted to hike by 50 bps. Dovish. However, a more hawkish observation was that the ECB comments about ‘progress’ weren’t meant to imply slower hiking..In other words there can be more 75 hikes too.

The EURUSD did whip around but is closing nearer the lows for the day at 0.99569 (the pair is trading at 0.9968). Yesterday at this time, the pair was bumping against the 100 day MA at 1.0088. Sellers leaned and going into the decision the pair was trading at 1.0035 just before the release. The price moved to a low of 0.9971 before bouncing to a NY session high at 1.0043. The rest of the day stepped down with support at 0.99515 (50% of the move up from last Friday’s low, and the cycle low going back to July 14) attracting some dip buyers. The low got within 5 pips of that target but could go no further. In the new trading day, that level and the rising 100 hour MA at 0.99442 will be eyed for more bearish clues. Move below should tilt the bias further to the downside.

Overall, the EURs moves today (vs the dollar and the other currencies) has that currency as the weakest of the major currencies.

The strongest of the majors today were the JPY (the BOJ is the next central bank on tap – a surprise would be an easing of the yield curve controls), and NZD (those currencies were virtually tied for the lead as the strongest currencies today). The USD and CAD also moved higher. The greenback moved up 1.05% vs the EUR and had gains of 0.45% to 0.53% vs the CHF, AUD, and GBP respectively.

The strongest to the weakest of the major currencies

US stocks were mixed with the Dow rising (5th day in a row), while the S&P and the Nasdaq closed lower for the 2nd day in a row ahead of Amazon, Apple and Intel after the close. The Dow 30 were supported by Caterpillar which rose 7.73%.That stock is up over 26% in the last month and up 2.64% YTD. Caterpillar is the new Apple. Boeing rose over 4.7% and McDonalds, up 3.62% also propelled the Dow.

The Nasdaq was hurt by Meta which plunged over -24% and had Cramer literally in tears. Amazon fell over -4% and Apple fell over -3% ahead of earnings.

The Nasdaq declines came despite lower yields which saw the 2 year down around 10 basis points at 4.319%. The 10 year moved lower by 8 basis points to 3.935% (back below 4%). German 10 year moved back below 2% today which helped to drag US yields down as well. Although the yields moving lower did not help the Nasdaq, the small cap Russell 2000 did close marginally higher (better than the Nasdaq).

The final stock numbers are showing:

  • Dow rose 198 points or 0.62%
  • S&P fell -22.59 points or -0.59% at 3808.00
  • Nasdaq fell -178.31 points or -1.63% at 10792.68
  • Russell 2000 rose 1.98 points or 0.11% at 1806.31.

Gold fell -$3.00 or -0.18%. Crude oil was up $0.96 at $88.85.

Fundamentally, the US GDP came in at 2.6% which was marginally higher than the 2.4% estimate (QoQ annualized).

PS After the close Amazon – on weaker guidance – has the stock down -18% in early after hours trading. Apple will report a little later. Will the next mega cap shoe drop?