The US Senate voted in favor of the revised 400 page rescue plan in an effort to shore up the balance books of the financial sector. Representatives said that a final vote by the House of Representatives could come as early as Friday. European Central Bank President Jean-Claude Trichet has stated his strong support for the US effort saying that the must “go (in favor), for the sake of the U.S. and for the sake of global finance.” Such statements have led some to believe that today’s ECB meeting will result a rate cut. Furthermore, the Euro hit a low of 1.3930 ahead of the key meeting.
Key Overnight Developments • EURUSD Hits Low of 1.3930 • US Senate Votes in Favor of Rescue Package • Australian Trade Balance Second-Largest in History Critical Levels The US Senate voted in favor of the revised 400 page rescue plan in an effort to shore up the balance books of the financial sector. Representatives said that a final vote by the House of Representatives could come as early as Friday. European Central Bank President Jean-Claude Trichet has stated his strong support for the US effort saying that the must “go (in favor), for the sake of the U.S. and for the sake of global finance.” Such statements have led some to believe that today’s ECB meeting will result a rate cut. Furthermore, the Euro hit a low of 1.3930 ahead of the key meeting. Asia Session Highlights After coming in positively only once since 2002, Australia saw its August Trade Balance rise to A$1.36 billion. Being the second largest balance in the country’s history, the metric rose after exports soared 6.44% while imports declined 2.4%. Much of this drive is contributed to a 26% burst in coal exports. Import sluggishness came as the average price of fuel fell 24.5%. Through the month, the Australian Dollar fell 8.8% against it’s US counterpart. New Zealand’s ANZ Commodity Price index for September plummeted the most in 21 years at -4.9%. Led by dairy, which alone fell 4.9% from August, the metric continued to reflect the bursting commodity bubble. Foreign investors dumped their holdings of Japanese Bonds as the credit crunch required banks and institutions to hold larger sums of cash than in previous times. Euro Session: What to Expect The European session tomorrow will be of utmost importance as the European Central Bank makes its Interest Rate Decision. While bond yield forecasts do not see rate cuts until the first three months of 2009, recent commentary by ECB President Jean-Claude Trichet may offer some doubt to those envisioning inaction today. At a press conference given in Frankfurt on Tuesday the president expressed his worries over the various banking failures, saying the US rescue plan “has to go (in favor), for the sake of the U.S. and for the sake of global finance.” If Trichet’s following press conference shows signs of dovishness, the Euro could fall a lot more than it already has. After three straight monthly declines, the UK Nationwide House Prices is expected to have continued its free fall through September at -1.9%. The metric which may be a reflection of the broader economy may add pressure to Mervyn King and the Bank of England to react to the credit meltdown. The release of the Credit Conditions Survey for 3Q will indeed reveal how badly the US banking sector has affected money markets in the British economy.
Relevant Articles: Euro Could Fall Further After Tomorrow’s ECB Meeting US Dollar Outlook Depends on Senate Approval of US Bailout Bill Dollar Could Be Troubled By Rate Cuts Even if Bailout Goes Through
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