Tuesday, November 18, 2014

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.

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