Of ECB, FASB and NFP

The ECB just announced a cut of 25 bps on its key rate, when the market expected a more urgent 50bps. Bank deposit rate is cut to 0.25% from 0.5%.

Within an hour, the EURUSD shot up a whopping 150 pips to 1.3490 from 1.3323. But as Trichet comes out to say there would be another cut coming, EURUSD retraced back to 1.3401.

I think the market is pricing EURUSD based on its interest rate differential against the dollar, which of course makes it attractive.Also, given the recent buoyant news that the IMF could double its reserves to USD 500bn and aid emerging European countries, alot of pressure is taken off from the EURUSD, given the EZ has a total bank exposure of USD 3.3trn to these countries.

In the medium term, EUR might be able to keep its shine against the USD as there are signs in economic data around the world that the crisis is bottoming out. I'll come to that in another post.

The FASB or Financial Accounting Standards Board in the US has gone to the vote today to loosen 'mark-to market' rules regarding accounting for troubled assets. This controversial transition has dragged on for a while now but with political pressure, these changes were passed.

Did Obama's admin say they'd do 'everthing' to save the economy?

The banks will definitely stand to gain, and an FT article today mentioned this could lead to an increase of up to 20% in quarterly profits of large banks. Sounds to me like this is stock positive.

Last week's continuing jobless claims in the US came in poorer than expected (above 650k), lending to fears that tomorrow's Non Farm Payroll will be bad.

Let's just keep the party going for today.