Fundamental Headlines
• U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up – Wall Street Journal
• Fed Resists Pressure to Cut Rates – Wall Street Journal
• Goldman, Morgan Stanley defend models – Financial Times
• U.S. Builders Probably Began Work in August on Fewest Houses in 17 Years – Bloomberg
• GM, Domino's, Novell Say Wall Street Woes May Ripple Through U.S. Economy– Bloomberg
• EURUSD - The Euro-Zone trade deficit widened to a new record high as the slowdown in the global economy dampened export demands. The deficit increased to 6.4B from 3.5B in June, and may fall further into negative territory as foreign demands fade. Slowing demands paired with stalled growth suggests that that economic activity may remain subdued for the rest of the year, and could force the ECB to lower the interest rate by next year. Meanwhile, construction output fell for the fifth consecutive month, slipping to -3.3% from a revised reading of -3.0% in June. For more news and resources, visit our EUR/USD Forum.
• GBPUSD – The U.K. labor market weakened further as jobless claims surged to a record high of 32.5K from a revised reading of 27.8K in July. The claimant count rate increased as well, rising to 2.8% from 2.7%, which suggests that labor demands may deteriorate further over the coming months. Furthermore, the ILO unemployment rate ticked higher as firms continued to cutback on employment, rising to 5.5% from 5.4% in June. BoE Governor King stated last week that he expects upside wage pressures to ease over the coming months, but went on to say that inflation expectations have increased, which could fuel upside price pressures in the near future. Meanwhile, the BoE Minutes showed that the MPC voted 8-1 to hold the benchmark interest rate steady at 5.00%, with David Blanchflower voting for a 50bp rate cut. For more news and resources, visit our GBP/USD Forum.
• USDJPY – The Bank of Japan voted unanimously to hold the benchmark interest rate steady at 0.50% as the world’s second largest economy continues to grapple with high inflation and stagnant growth. The central bank noted that economic activity remains sluggish, and went on to say that ‘tensions in global financial markets have increased and there are downside risks to the world economy.’ With Lehman Brothers filing for bankruptcy and AIG taking a $85B infusion from the Fed, the BoJ has increased their efforts to calm the markets by injecting 5.5 trillion yen in the past two days. Discuss the topic and your trade ideas in the USD/JPY Forum.
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