The euro opened in New York (8:00 am) at 1.3759 near the top of the European range (1.3768) but well above the 1.3733-50 pricing in Asia. The break higher came in early London when the euro climbed from 1.3738 to 1.2763 in about 45 minutes as the euro breeched the day's high of 1.3750.
Weak US October ADP employment data at 8:15 am (130,000 vs. 150,000 and August revised to 145,000 from 166,000) gave the euro a quick spike to 1.3378 that leveled out at 1.3760 before U.S. CPI figures at 8:30 am. The results were largely as expected (CPI 0.2% m/m, 1.2% y/y, core 0.1% m/m, 1.7% y/y) though there was a whiff of deflation in the headline numbers which historically have only been this low in recessions.
The euro had already dropped to 1.3744 when weak German inflation data was released at 9:00 am (-0.2% m/m, expected 0.0%, 1.2%y/y, expected 1.4%). Eur/yen demand brought the rate back to 1.3776. Trading slippage again brought the united currency back to a range between 1.3761 and 1.3773 awaiting the Fed FOMC policy announcement at 2:00 pm.
Just before the statement the euro spiked to 1.3785 but at the release it immediately crashed to 1.3740 and continued down to 1.3696 within 30 minutes. U.S yields rose with the FOMC statement largely because of the removal of language stating that tighter financial conditions could slow the pace of improvement in labor markets.
The Fed Funds target was unchanged at 0.0-0.25% and quantitative easing remained at $85 billion a month, both as expected. The moderate growth characterization of the economy was repeated. The sole change in the wording was seen as slightly tilted towards a firmer rate stance largely because poorer recent U.S. statistics has anticipated a more accommodative tone or at least an acknowledgement of the weak job production.
The sharp dip below 1.3700 brought out buyers and the return to 1.3740 took only half an hour. Trading closed at 1.3736.
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