In the interview below, Vecchio discusses actions by the ECB, the decoupling of the US from the rest of the world and more. Bullishness in felt only concerning the EUR/CHF floor.

John Kicklighter of DailyFX discusses the crisis, the US economy, the status of safe haven currencies and more in the interview below.

European leaders would also be aware of the growing international pressure to put their house in order, with US Treasury Secretary Geithner, the Chinese Premier and Russia’s president Putin all voicing their concerns. To make matters worse for the single currency, Angela Merkel’s party once again fared poorly in regional elections over the weekend in Berlin. Interestingly, the pro-Europe opposition SPD performed rather well. It is the dollar and the Japanese yen that have benefitted most from the euro’s latest tumble. For the greenback in particular, September has been a very fruitful month. Government bond yields for the likes of the US, Germany and the UK are back in the sweet-spot, while equities are once more on the back foot.

Prior to Bernanke’s speech, the policy committees of the BOE and ECB meet – QE will certainly be up for discussion at the MPC meeting, while some ECB officials must surely press for a rate cut. The expectation that policy officials in the major economies are considering further action over coming days to support their ailing economies has encouraged some short-covering in risk assets, with the FTSE 100 up more than 3% yesterday and the battered DAX up over 4%. The gold price took a sharp tumble yesterday, briefly plunging through $1,800, this after reaching a record high the previous day of USD 1,921. Of interest for the FX market over the last couple of days has been the softness of the pound. With the Chancellor still firmly committed to fiscal consolidation, the Bank considering additional asset purchases and the economy still in dire shape, it is little wonder that the currency is under pressure.

Many of the rumours surrounding France were way off the mark, with triple-A ratings affirmed from the main agencies and the 10-year bond yield hitting a new low for the year at the 3.06% level.  At the moment, the early prospects for European stock exchanges looks positive, but as recent sessions have shown, this offers few guarantees.  In the FX space, the Swissie is weaker overnight on comments from the SNB’s Jordan whilst the Aussie, and more so the kiwi, have recovered overnight, the former held back by disappointing jobs data.

Furthermore, it has changed its outlook, from expecting the pace of recovery to pick up over coming quarter, to expecting “a somewhat slower pace of recovery over coming quarters” than it did at the time of the previous meeting. By using words over actions, the Fed has chosen to keep some of its limited arsenal in reserve. The Fed, more than any other central bank, is running low on policy options and the reaction on stocks especially reflects the fact that markets are starting to sense that.

Talk is of around JPY 1trln of yen sales, although there is no confirmation of this.  Naturally, the key question is how effective both the BoJ and SNB will be in terms of arresting the appreciation of their currencies.  In reality, they are fighting some fairly strong forces that are likely to be in place for months, if not years.  Furthermore, the fact that the SNB has not come out selling francs is pertinent.  After the intervention of 2009-10 which failed to stop the franc’s increase, it (given its balance sheet) is less inclined to jump in again.  Both Japan and Switzerland are unlikely to achieve long-term success with this week’s policy action, Switzerland especially so.

• BoE still swimming in a sea of uncertainty
• Risk appetite returns with a flourish
• China changing tune on the yuan
• Green light for Aussie gains

Guest post by FXPro

Guest post by FxPro