Currency Weekly Wrap-up
The Federal Reserve minutes from the September FOMC meeting stated that the decision was easier than at the August meeting as there was some signs of moderating inflation although the Fed was still concerned over inflationary pressure. There was a prolonged discussion over the growth outlook, especially in view of the sharp slowdown in housing.
Comments from Fed officials during the week were generally firm on inflation, although Governor Poole stated that the risks of a slowdown in growth were now higher than the risks of a further increase in inflation.
As far as economic data is concerned, retail sales fell 0.4% in September, primarily due to the impact of a sharp gasoline sales and underlying demand was firmer. Jobless claims remained below the 310,000 in the latest week which reinforced confidence over the labour market. Futures markets moved to indicate that an unchanged level of interest rates for the next few months was the most likely outcome.
The US trade deficit rose to a record US$69.9bn in August from US$68.0bn the previous month. Exports posted solid growth for the month while imports also remained high as oil imports rose to a record level with the overall oil price strengthening from July levels.
The ECB continued to take a tough stance on monetary policy with Trichet pointedly not discouraging market speculation that there will be another interest rate increase in December. There was little in the way of major Euro-zone economic data, although there was firm industrial production data across the region.
The US dollar strengthened to highs around 1.25 against the Euro on a revision to interest rate expectations and the US currency held firm after the US retail sales report.
The Bank of Japan left interest rates unchanged following the latest policy meeting and the bank also left its economic outlook unchanged. Bank of Japan governor Fukui refused to rule out an interest rate increase before the end of 2006. The yen weakened to near 120.0 against the dollar before finding some support.
The UK trade deficit fell slightly to GBP6.7bn in August from a revised GBP6.8bn the previous month, although the impact was limited as markets remain concerned over the quality of the data, in particular the difficulties in measuring exports.
The Bank of England governor and deputy governor both warned over the inflation risks during the week, reinforcing market expectations that interest rates would be increased in November. There was little in the way of UK data releases over the week and Sterling weakened to lows below 1.8550 against the US dollar as the US currency strengthened.
The Australian data was stronger than expected with employment increasing by over 30,000 in September while unemployment dipped to 4.8% from 4.9%. The Reserve Bank governor also warned that interest rates were still more likely to rise than fall in the short term and this combination pushed the Australian currency stronger with gains back above the 0.7520 level against the US dollar. The Canadian dollar weakened to near 1.14 against the US currency as oil prices continued to weaken.
Comments from Fed officials during the week were generally firm on inflation, although Governor Poole stated that the risks of a slowdown in growth were now higher than the risks of a further increase in inflation.
As far as economic data is concerned, retail sales fell 0.4% in September, primarily due to the impact of a sharp gasoline sales and underlying demand was firmer. Jobless claims remained below the 310,000 in the latest week which reinforced confidence over the labour market. Futures markets moved to indicate that an unchanged level of interest rates for the next few months was the most likely outcome.
The US trade deficit rose to a record US$69.9bn in August from US$68.0bn the previous month. Exports posted solid growth for the month while imports also remained high as oil imports rose to a record level with the overall oil price strengthening from July levels.
The ECB continued to take a tough stance on monetary policy with Trichet pointedly not discouraging market speculation that there will be another interest rate increase in December. There was little in the way of major Euro-zone economic data, although there was firm industrial production data across the region.
The US dollar strengthened to highs around 1.25 against the Euro on a revision to interest rate expectations and the US currency held firm after the US retail sales report.
The Bank of Japan left interest rates unchanged following the latest policy meeting and the bank also left its economic outlook unchanged. Bank of Japan governor Fukui refused to rule out an interest rate increase before the end of 2006. The yen weakened to near 120.0 against the dollar before finding some support.
The UK trade deficit fell slightly to GBP6.7bn in August from a revised GBP6.8bn the previous month, although the impact was limited as markets remain concerned over the quality of the data, in particular the difficulties in measuring exports.
The Bank of England governor and deputy governor both warned over the inflation risks during the week, reinforcing market expectations that interest rates would be increased in November. There was little in the way of UK data releases over the week and Sterling weakened to lows below 1.8550 against the US dollar as the US currency strengthened.
The Australian data was stronger than expected with employment increasing by over 30,000 in September while unemployment dipped to 4.8% from 4.9%. The Reserve Bank governor also warned that interest rates were still more likely to rise than fall in the short term and this combination pushed the Australian currency stronger with gains back above the 0.7520 level against the US dollar. The Canadian dollar weakened to near 1.14 against the US currency as oil prices continued to weaken.
posted by Naveen Pantera at 5:19 PM
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