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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