Dollar weakens after Fischer statement changes rates view

•     Dollar weakens after Fischer statement changes rates view

–    Fed funds futures implied interest rate falls nearly 10 bps; 30yr yield breaks 3%

–    Inflation expectations are coming down in US, Eurozone, UK

–    Market is getting concerned not only about the possibility of deflation, but also the ability of central bankers to do anything about it any more

•     Nonetheless, SEK, AUD and NZD gain, showing some confidence in global growth

–    These are growth-sensitive currencies; surprising that they gain when stocks are down

–    SEK maybe boosted ahead of today’s CPI for Sep, which is expected to rise

–    AUD and NZD boosted by cut in PBOC repo rate, but this looks like a small move, not part of a broader easing of monetary conditions = sell the rally

•     Today:

–    Eurozone: ZEW index for October expected to decline, could hurt EUR. Eurozone industrial production for August also forecast to fall

–    UK:  CPI expected to slow for 3^rd consecutive month, taking some pressure of BoE to tighten and possibly weakening GBP. But labor data out Wednesday may show faster growth in average earnings, which would counter the CPI data

–    US: NFIB small business optimism survey expected to decline slightly. Not likely to be market-moving