FOMC READIES A RATE CUT

The euro lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2330 level and was capped around the $1.2585 level. The common currency has recently traded at its lowest levels since April 2006 as dealers continue to speculate European Central Bank will reduce interest rates next week, possibly by as much a 50bps. Data released in the eurozone saw GfK German consumer confidence steady. In U.S. news, the October consumer confidence index reached a record low of 38.0, far below expectations and far below September’s revised 61.4 print. Other data saw the October Richmond Fed’s manufacturing index print at -26, down from September’s -18 level. It was also reported that the S&P/ Case-Shiller U.S. house price index fell a record 16.6% in August. Most traders expect the Federal Open Market Committee will cut rates by up to 50bps tomorrow. Sixteen new U.S. banks accepted more than US$ 33 billion in U.S. government cash, part of the government’s US$ 250 billion recapitalization efforts. Euro bids are cited around the US$ 1.2135 level.