Dollar recovers against almost all G10 currencies

Dollar recovers against almost all G10 currencies

–    Some mean reversion during European trading (AUD and NZD especially)

–    Lots of volatility:  EUR/USD range 1.1%, USD/JPY 1.4% while US stocks unchanged

–    Bond yields rise despite Fed paper saying the risk of high inflation is unusually low

•     USD strength probably reflects lack of alternatives

–    Japan now back in recession; QE program likely to stay in place

–    Draghi and Mersch gave speeches yesterday in which they both talked about the possibility of more asset purchases. Significant as Mersch is a big hawk

•     RBA minutes give no further clues about AUD direction

•     Today:

–    Eurozone: ZEW survey for November:  current situation index expected to fall, but expectations index expected to turn positive. Improvement in expectations index may be EUR-positive.

–    UK:  CPI rate for October expected to stay at 1.2%. Could push back expectations for rate hike = GBP-negative

–    US: PPI for October expected to rise yoy at a slower pace than in Sep, confirming the low risk of inflation. Could be USD-negative. NAHB housing index expected to rise.