Major FX Crosses Thoughts
USD - The market waits for the Fed minutes. The risk tonight is that increased rate cut speculation will run into rather hawkish minutes in which case you will see the stronger dollar.
EUR - Yesterday the ECB hawks were out in force again with Wellink and Garganas growing headlines. Wellink reportedly said that rates were ‘damn low’. Garganas insisted that liquidity is high, rates remain at low levels and monetary conditions still loose. The implications are obvious, but the market already knows their point of view and is now wondering what this means beyond 2006 for the whole of the ECB. The December rate hike has been a done thing for a longer while, but what to expect from 2007. The euro was unaffected by this latest round of comments.
GBP - After four quarters of faster economic growth consumers are finally starting to regain their confidence in the job market. The improved sentiment will help to support economic growth at an above-trend pace in 2007, and bodes well for the housing market as people are more likely to move.
UK CPI was unchanged at +2.4% y/y, while core CPI was also unchanged at +1.4%. The outcomes were weaker than expected and doubly surprising perhaps after the stronger than expected data seen in the previous two months. There was a real mixed bag of influences, with education and food exerting upside pressure on the CPI y/y rate and fuels and furniture/household goods exerting downward pressure. Although today's news will have come as a surprise to the Bank of England, it is unlikely to be enough of a concern to change the Monetary Policy Committees current stance on interest rates -- which are still likely to rise again early next year.
JPY - The JPY is still treading water after yesterday’s stronger than expected GDP data. EUR-JPY is the one to watch. A close outside the 150.75-151.50 area will most probably define the short-term trading bias. The market will be looking for more hints on policy at tonight’s BoJ rate announcement, although as noted above there may be some apprehension ahead of the G20 meeting. The Japanese Yen is stronger across the board thanks to solid GDP numbers. Growth accelerated by 0.5 percent in the third quarter, bringing the annualized pace up to 2.0 percent. This is the seventh straight month of higher quarterly GDP growth, which suggests that if things continue this way, we could see an interest rate hike by the Bank of Japan early next year.
AUD - Australia's labour market is the tightest it has been in over 30 years, given the three-decade low unemployment rate of 4.6 per cent, yet wages growth has been muted in response. As far as future RBA deliberations are concerned, the data supports the RBA remaining on hold.
It was a welcome fall in wage cost growth and wages are the main variables in the RBA's inflation forecast. So that eases some of the pressure for another rate hike.
The consumer sentiment figures suggests the risk to spending are on the downside. Households are clearly hurting from higher rates, while inflation is eating into incomes.
CNY - The People's Bank of China in its Q3 monetary report published on its website expects China's economic growth to exceed 10% this year with the consumer price index rising about 1.5%.
EUR - Yesterday the ECB hawks were out in force again with Wellink and Garganas growing headlines. Wellink reportedly said that rates were ‘damn low’. Garganas insisted that liquidity is high, rates remain at low levels and monetary conditions still loose. The implications are obvious, but the market already knows their point of view and is now wondering what this means beyond 2006 for the whole of the ECB. The December rate hike has been a done thing for a longer while, but what to expect from 2007. The euro was unaffected by this latest round of comments.
GBP - After four quarters of faster economic growth consumers are finally starting to regain their confidence in the job market. The improved sentiment will help to support economic growth at an above-trend pace in 2007, and bodes well for the housing market as people are more likely to move.
UK CPI was unchanged at +2.4% y/y, while core CPI was also unchanged at +1.4%. The outcomes were weaker than expected and doubly surprising perhaps after the stronger than expected data seen in the previous two months. There was a real mixed bag of influences, with education and food exerting upside pressure on the CPI y/y rate and fuels and furniture/household goods exerting downward pressure. Although today's news will have come as a surprise to the Bank of England, it is unlikely to be enough of a concern to change the Monetary Policy Committees current stance on interest rates -- which are still likely to rise again early next year.
JPY - The JPY is still treading water after yesterday’s stronger than expected GDP data. EUR-JPY is the one to watch. A close outside the 150.75-151.50 area will most probably define the short-term trading bias. The market will be looking for more hints on policy at tonight’s BoJ rate announcement, although as noted above there may be some apprehension ahead of the G20 meeting. The Japanese Yen is stronger across the board thanks to solid GDP numbers. Growth accelerated by 0.5 percent in the third quarter, bringing the annualized pace up to 2.0 percent. This is the seventh straight month of higher quarterly GDP growth, which suggests that if things continue this way, we could see an interest rate hike by the Bank of Japan early next year.
AUD - Australia's labour market is the tightest it has been in over 30 years, given the three-decade low unemployment rate of 4.6 per cent, yet wages growth has been muted in response. As far as future RBA deliberations are concerned, the data supports the RBA remaining on hold.
It was a welcome fall in wage cost growth and wages are the main variables in the RBA's inflation forecast. So that eases some of the pressure for another rate hike.
The consumer sentiment figures suggests the risk to spending are on the downside. Households are clearly hurting from higher rates, while inflation is eating into incomes.
CNY - The People's Bank of China in its Q3 monetary report published on its website expects China's economic growth to exceed 10% this year with the consumer price index rising about 1.5%.
posted by Naveen Pantera at 7:44 PM
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