The Week in Rewind

USD - New week started with frim note as it tries to reover some ofits last week losses. In the recent days we hearing a lot of hawkishcomments from the Federal Reserve officials. This is directingtowards higher inflation risk. First we take the PPI matched the biggest monthly drop while Core PPI fell to the level of 13 ears low.Even Retai Sales too disappointed significantly. This is the double s\smah for the Dollar and raises the question to the Federal Reserve thatFed is being overly aggressive with their interest rate keeping at anearly 5 years high for some time. But Fed is still giving hawkish comments keeping mind on risk of higer inflation espit drop in PPI.We saw the surprising stronger Empire State Manufacturing Index andhawkish FOMC Minutes of Meeting. Empire State index rose to 26.7 from22.9 when the consensus was prediciting the negative reading. But onecant get excited by this read as Philadelphia Fed, Chicago PMI and ISMIndex did not done good. In FOMC Minutes, their view on risk of higerinflation and they said that there are still downside risk to theeconomic activity. And also FOMC reports says that Fed is comfortablewith the growth outlook, mainly as the labor market remain tight.In this week the tarders are concentration on the hawkish commentsfrom Fed officials than US Economic Data.CPI dropped for the secondmonth in a row by larger than expected 0.5%, the annualized growth rate down from 2.1% to 1.3% to the level of 4 years low. Well the pointis that CPI is held far better than PPI. The drops in both the Headline and Core prices give some room to the Fed on more thinkingabout growth than inflation. Industrial Production accelerated weakerthan expecte to 0.2% and Philadelphia Index rose to 5.1% from the -0.7%, Philly Fed not rosed to the levels of what Empire State did.The underlying components of indes was very disappointing. NAHB Housing Mrket Index rose to 33 from 31, this data tells us thathousing market may be finding some support. But on Friday Housing Starts and Building permits disappointed us. Building permits also fell for the eighth straight month, indicating that there are even fewer projects in the pipeline. Everyone is thinking about the bottom of the housing market but it isnt still no support. So in thisweek we saw some hawkish comments from fed officials, falling inflation, trade is worst one, housing market still in doomy, and consumer spending is getting weaker. So for the next week itsnothing in the calendar, i feel rangebound for the Dollar.

EUR - stared this week with fully loaded and heavy weight economicdata from Germany like CPI, GDP and ZEW Survey. First we saw a dropin GDP to 0.6% from 0.7%. German ZEW Survey also dropped from -24.5 to -28.5 a 13 year low. Then we got the call from french Prime Minister Villepin or collaboration on dealing with the euro. As this poses risk to the export oriented countries and Germans opposed it. CPI raised slightly to 0.1% and Core CPI kept unchanged at 1.5%. Despite the softer inflation, weaker GDP and ZEW data theEuro kept cool bcoz ECB have there own game plan for Decemberrate hike. On Friday we got imporved French Current Account and EuroZones Trade balance. French payrolls increased less than expected.

GBP - PPI prices dropped by 0.2 in the month of October, annualizedprice down to 1.7% from 1.8%. Core PPI were firmer which is good.The housing market continues to remain stronger. CPI rosed moest 0.2% keeping the annualized price at unchanged at 2.4% even Core CPI alsoremained at unchanged. Retail Price Index increased to the higestlevel since 1998. The strength of the sousing market keeps consumerhappy and Retail sales jumped by 0.9%. The RICS House price is also increased to 46% to 48% a 4 year high.

JPY - Both Import and Export prices softened in the month of october,bringing the Consumer Goods price to the 6 month low. Fukui is sendinglot of mixed messages and traders gets confused. GDP numbers arevery impressive the third quarter numbers accelearted to 0.5% andannualized numbers pace upto 2%. And this is the seventh straightmonth og hiher GDP numbers. After the GDP numbers BoJ kept the interest rate unchanged at 0.25%. Still short yen carry trades arecontinuing. Fukui said that economy is growing at moderate pace and he said that there were no pre-determined notion and he dosent ruleout the next rate hike in December. Leading Indicator down to 18.2from 20 in the month of September. A rumour is spread accross the FX market as one of the leading Hedge Fund want to liquidate from theirshort carry Yen trade position.