ForexLive US wrap: ECB hikes, goes easy on Portugal

ECB hikes refi rate to 1.5%, as expected; suspends collateral requirements for Portuguese debt Further hikes anticipated as Trichet says further adjustment to rates is warranted ADP employment report rise 157,000; more than double expectations Optimism debt pact achievable; meeting of leaders, Obama on Sunday Pimco's ElErian: Low probability of QE3 Juncker threatens to form European rating agency after Moody's downgrade of Portugal S&P raises ratings outlook on California to stable from negative S&P 500 rallies 1% to 1353 US 10-year note yield rises 3.3 bp to 3.143% Oil rises $2 to $98.66 EUR/USD fell to session lows of 1.4220 in the early stages of the ECB press conference from levels of about 1.4250 as the conference began. An erroneous headline saying the ECB had omitted a line seen as a signal of continued tightening ahead helped spur the drop. We rebounded quite sharply on Asian buying in the 1.4230s and on the correction of the headline. A further jump was fueled by news that the ECB suspended its collateral rules on Portuguese government debt. A ham sandwich is now suitable collateral if submitted by a Portuguese bank...Bank stocks took off on the news and the a risk-on atmosphere soon prevailed. EUR/USD leapt as high as 1.4375 before consolidating in a 30 pip range just below those highs most of the afternoon. USD/JPY jumped to 81.40 on the very firm ADP report which raised hopes for strong payrolls tomorrow. Japanese exporters and the Bank of Korea were rumored sellers into strength. We consolidated in a 81.15/25 range for much of the US afternoon. A move through the 81.75/80 area is needed to raise pulses in USD/JPY too much, traders say. Stops are seen above 81.50 near-term, they report. Rallying commodities and rising risk appetites helped lift AUD to 1.0777 at the close. CAD was volatile, dropping on a sharp drop in the Ivey PMI index before recovering in the afternoon. It ends at 0.9585. CHF lost ground against the USD and EUR as the risk-off sentiment out of Portugal gave way to risk-on sentiment out of the US... 0.8445 and 1.2125 are closing levels.