AUD RBA statement pegs inflation at 3% long term moderation possible
JPY Current Account in line, IP falls 0.7%
UK PPI Output Down 0.2%
US only has Monthly budget statement
Both the euro and yen lost most of their Asian session gains in quiet consoldative trading as the week commenced. The euro, which climbed to a high of 1.2880 in Tokyo retreated to 1.2850 in the absence of any fresh EZ eco data and mildly bullish support for the greenback from oil which continued to trade below $60/bbl. The yen meanwhile staged a modest rally in Tokyo trade but gave up most of its gains as Japanese data released throughout the session provided little positive value. Domestic CGPI printed at 0.3% far lower that 0.1% expected recording the first monthly decline in sixteen months hardly a screaming case for further rate hikes from the BOJ. The Current Account, as expected, registered a rise to 2 Trillion yen from 1.4 Trillion yen the month prior as lower yen helped boost exports while Consumer Confidence improved to 48.4 from 46.6 in September but remained below the 50 boom/bust level. Dealers reported that order flows were generally light with most speculative accounts awaiting tonights Japanese GDP data. Japans Q3 GDP is expected to match the anemic 1.0% growth rate of Q2, but some traders fear the possibility of an even a weaker result and that negative bias may pressure the unit for the rest of the day.
Trading may be uneventful for the rest of the day, as US calendar is essentially barren, but should pick up markedly by tomorrow when both the ZEW and US Advanced Retail Sales hit the tape. The dollar suffered last week on talk of Central Bank diversification with EUR/USD breaking out convincingly above the former equilibrium level of 1.2700. The pair now stands within striking distance of the psychologically important 1.3000 figure, with many specs no doubt itching to trigger the large amount of stops resident at that barrier. But with EZ growth beginning to show signs of slowdown, European finance ministers will not look kindly at such fast appreciation for the euro remembering vividly the moribund growth of 2005 which resulted after the rapid rise in the EUR/USD rate at the end of 2004. Therefore this time the move towards 1.3000 is unlikely to occur with ease unless US data proves truly negative and speculative flow overwhelms any Central Bank offers.
