Fundamental Headlines • Big Currency Bets Backfire – Wall Street Journal • Apple's Net Surges 26% as iPhone Connects – Wall Street Journal • Fed offers $540bn to prop up money funds – Financial Times • Citigroup May Eliminate 160 Jobs at Japanese Unit – Bloomberg • Depository Trust to Buy LCH.Clearnet for $951 Million – Bloomberg • GBPUSD – The Bank of England minutes showed that the board voted unanimously to lower the benchmark interest by 50bp to 4.50% on October 10, which was the largest reduction by the MPC since 2001. The minutes noted that economic activity has ‘deteriorated substantially,’ and stated that there have been increased arguments for the BoE to ease policy further as growth prospects falter. In addition, the central bank highlighted that upside inflation risks have ‘shifted decisively to the downside’ in the near-term, which suggests that the BoE will continue to lower borrowing costs as fears of a global recession intensify. Meanwhile, Governor Mervyn King state that it ‘seems likely’ that the U.K. will slip into a recession in the third quarter during a speech yesterday, which led investors to raise bets that the MPC will lower the overnight rate once again at their next meeting in November. Discuss the topic and your trade ideas in the GBP/USD Forum. • EURUSD – The Euro-Zone budget deficit narrowed to 0.6% of GDP in 2007 to reach its lowest level in seven years, while the debt held by the government fell to 66.3% of GDP from 68.5% in 2006. Despite the improved data, market participants expect the deficit to widen significantly in 2008 as policymakers throughout the 15 European nations bailed out distressed banks and financial institutions this year. Furthermore, as the economy teeters on the brink of a recession, the government could be forced to step in and extend its fiscal policy objectives in order support economic growth. Discuss the topic and your trade ideas in the EUR/USD Forum. • USDJPY – Japanese supermarket sales fell another 2.2% in September after declining 1.0% in the previous month, indicating that private-sector consumption may fall further as prices pressures remain high. Fading demands from the global economy paired with the rise in the unemployment rate suggests that the Bank of Japan may face a full-blown recession by the end of the year as the growth outlook turns increasingly dim. For more news and resources, visit the new Japanese Yen Currency Room.
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