Euro spikes high on coordinated central bank strike (30th)

USD

The dollar spiked down after risk appetite took a sudden leap of faith following a co-ordinated strike by the world's central banks to avoid an imminent credit crunch. The major central Banks of America, Europe, Japan, the UK, Canada and Switzerland all agreed to lower the interest they charge  for emergency dollar lending; as well as opening bilateral credit lines in other currencies too. The risky currencies spiked up over 2% after the news. Positive sentiment was also helped by employment data which showed a higher than expected number of people returned to work. ADP Employment Change for the month of November showed a rise of 206k jobs in the private sector compared to 128k expected; October's figures were also revised up to 130k vs 110k previous. Earlier on in the trading day the news that the People's Bank of China had lowered its reserve requirements for banks also stimualted risk appetite appetite. Later at 19:00 GMT the Fed will release its Beige Book with implications for the dollar as it casts a light on the ongoing economic situation in the U.S.

EUR

The euro rallied after a coordinated central bank effort to lower the cost of emergency dollar funding and "ease strains in financial markets," led to a spike higher in euro pairs. The intervention had been prompted by fears of another credit crunch like that of the 2008 financial crisis. The meeting of euro-zone finance ministers failed to provide any concrete measures to bolster the EFSF although the next 8bn tranche to Greece was agreed and there were promises of a deal for the EFSF being announced in 10-days time. Other news and data was essentially risk positive as Pboc reduced the reserve requirements for banks and U.S data showed a rise in people in employment. However, such gains were mitigated in part by less optimistic data from Europe where the unemployment rate rose to 10.30% vs 10.20% expected and 10.20% previous. Other data showed that German Unemployment fell by 20k which was more than the 5k drop expected, although the Unemployment Rate in Germany actually bucked the trend by falling to 6.90% vs the 7.0% prior and no-change expected. Finally euro-zone CPI remained unchanged at 3.0%, in line with expectations.

GBP

 Sterling strengthened substantially after global risk sentiment rose following joint action by all the major central banks in the world to ease liquidity in credit markets. Cable rallied to highs of 1.5779 on the news, and the pound gained further support from its newfound safe haven status as investors fleeing the euro-zone sought security in U.K gilts, which have been largely unaffected by the contagion in Europe. The after-effects of the Autumn Budget Statement may also still have been felt as sterling drew strength from a host of new austerity measures as well as a credit line to SMEs. On the data front, shrinking Money Supply and Consumer Credit data were offset slightly by increased Mortgage Approvals and Borrowing on Dwellings, which rose to 1.3bn. On Wednesday the economic docket was a lot thinner with the Gfk Consumer Confidence Survey showing a fall to -31 - slightly higher than the -33 expected and -32 in the previous month. Tomorrow sees the release of house price data and Manufacturing PMI, which is expected to drop to 47 from 47.4.

JPY

 The yen traded mixed – rising against the dollar but falling versus the euro and the pound after risk appetite gained following the news of renewed operations by major central banks to enhance credit lines and ensure continued liquidity in financial markets. In a speech by deputy governor of the BOJKiyohikoNishimura, the official highlighted the risks from the euro-zone, saying that: "Europe's sovereign debt problems are essentially the result of expanding imbalances in the region, thus we need to be aware that there is no immediate silver bullet for these problems." He also spoke of the BOJ's willingness to use intervention in the event of a financial crisis causing another bought of yen safe-haven buying and the currency's exchange rate became de-coupled from fundamentals. On the data front Industrial Production data showed a rise to 0.4% YoY in October versus -1.0% expected and -3.3% in the previous month, whilstMoM the rate increased by 2.4%?vs 1.1% expected and -3.3% in the previous month. Nomura/JMMA'sManufacturingPMI meanwhile fell slightly to 49.1 vs 50.6. Labour Cash earnings increased to 0.1% vs -0.2% expected and -0.4% in the previous month and Housing Starts slowed their decline by -5.8% compared to -6.3% expected. Vehicle Production and Construction Orders in October both increased by over 20% when they had fallen in the previous month.