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- Nov, 20 US Dollar, Japanese Yen Surge on Risk Aversion as Dell Earnings Disappoint
- Nov, 19 US Dollar Advances as Nikkei Leads Stocks Lower in Asian Trading
- Nov, 18 Currency Markets May Look Past BOE Minutes, Focus on US Inflation and Housing Data
- Nov, 17 Greenback Finding Some Support into European Trade
- Nov, 13 Euro Vulnerable If Third-Quarter GDP Continues to Show Weak Private Sector
- Nov, 12 Australian Dollar Hits Fresh Yearly High as Jobs Data Boosts Rates Outlook
- Nov, 11 British Pound in Focus as BOE Reveals Inflation Report, Jobless Rate Hits 12-Year High
- Nov, 10 Pound Tumbles on UK Credit Outlook, Euro Exposed with ZEW to fall for Second Month
- Nov, 09 New Zealand Dollar Soars on Exports Outlook, USD Sinks Amid Bets on Dovish Fed
- Nov, 06 Currency Markets to Look Past European Economic Data, Focus on US Jobs Report
- Nov, 05 British Pound in Focus with BOE Set to Expand Stimulus, Likely Inaction from ECB
- Nov, 04 Euro in Focus as Producer Prices Fall For Ninth Month, Threatening Continued Deflation
- Nov, 03 Australian Dollar Falls Despite Interest Rate Hike as RBA Hints Shift to Neutral
- Nov, 02 US Dollar May Correct Lower but Risky Assets are on Shaky Ground
- Oct, 29 US Dollar May Extend Gains as Dismal European Data Fuels Risk Aversion
- Oct, 28 Euro May Extend Losses as German Inflation Shrinks, Paring Bets on ECB Rate Hikes
- Oct, 27 US Dollar Consolidates Gains, Australian Business Confidence Hits 15-Year High
- Oct, 26 US Dollar Falls as Asian Stocks Advance on Earnings, South Korea GDP
- Oct, 23 Euro Gains in Focus Ahead of IFO, PMI Data; UK GDP May Disappoint in Third Quarter
- Oct, 22 US Dollar Rises as Stocks Sink in Asia on Wells Fargo Downgrade, China GDP
The Japanese Yen pushed higher in overnight trading as the Bank of Japan skirted a confrontation with the Ministry of Finance and moved to end their purchases of corporate bonds while the jobless rate fell for the second consecutive month on government hiring. Euro Zone Consumer Price Index data headlines the calendar in European hours.
Key Overnight Developments
• Japan’s Jobless Rate Falls as Government Steps Up Hiring
• Australian Lending Unexpectedly Shrinks, Threatening Recovery
• Bank of Japan Holds Rates, Avoids MOF Confrontation For Now
Critical Levels
The Euro advanced in overnight trading, adding as much as 0.2% against the US Dollar. British Pound trading was a bit more muted, but sterling also managed to tick higher to test as high as 1.6579 ahead of the opening bell in Europe.
Asia Session Highlights
Japan’s Jobless Rate unexpectedly fell for the second consecutive month, down to 5.3% in September from 5.5% in the previous month. Economists were forecasting a 5.6% result. The ratio of available jobs to seeking applicants rose to 0.43, the first gain since June 2007. The outcome may not be as rosy as it seems however considering gains were led by government jobs, which rose 5.2% from August. Prime Minister Yukio Hotoyama said last week that his government will create as much as 100,000 jobs by March in the face of sluggish employment in the private sector. Indeed, a recent survey by Nikkei English News showed large Japanese companies plan to cut hiring of new college graduates by 28.6% next year. Public support of labor markets can only go so far, however, considering Japan has the dubious honor of having the largest fiscal deficit of any industrialized country. To that effect, the big question facing Japan as well as most other countries at this point is whether the tentative rebound of recent months can survive after the flow of government cash dries up.
The Bank of Japan kept interest rates unchanged at 0.10% as expected and struck a narrow balance between competing interests at the central bank and the Ministry of Finance (MOF), saying it will allow its program of purchasing corporate debt expire as scheduled in December but kept its government bond purchases at 1.8 trillion as before. Japan’s top economic policy agencies have engaged in a public feud over BOJ’s asset-buying schemes, with central bank striking a hawkish tone while the MOF has pushed for the purchases of bonds to stay in place a way to contain yields and support government debt prices as it works to finance the burgeoning fiscal deficit. While a major confrontation has been averted for the time being, but the deficit is not a problem that will go away soon and the two policy bodies will invariably lock horns again in the months ahead.
Australia’s Private Sector Credit unexpectedly shrank for the first time in nine months September, dropping -0.2%. In annual terms, lending grew 1.7%, the slowest in 16 years. Details of the report proved ominous: business lending fell -1.3%, the most since December, hinting at hiring and output in the months ahead. The situation will be all the more difficult considering the Reserve Bank of Australia (RBA) is poised to continue raising benchmark interest rates after becoming the first central bank in the G20 to do so this month in the aftermath of last year’s global financial crisis and credit crunch. The markets still bet that the RBA will raise rates by 25 basis points next week but traders’ conviction is on the wane, with a Credit Suisse gauge of priced-in rate hike expectations down 28.2% over the past two weeks.
Euro Session: What to Expect
A preliminary estimate of October’s Euro Zone Consumer Price Index is set to show deflation continued for the fifth consecutive month. It seems increasingly inevitable that continued losses will bleed into future inflation expectations, encouraging consumers and businesses to wait for the best possible bargain and delay spending and investment, thereby threatening the fragile economic recovery. Some room for an upside surprise this time around does exist however after German inflation data surprised to the upside earlier this week on the back of a rebound in energy prices. That said, the same release showed that import prices fell at an annual pace of -11.0%, suggesting price pressure in the pipeline is decidedly weak as the Euro continues to push higher, boosting Europeans’ purchasing power and effectively helping to drive down prices in terms of the single currency. Indeed, these very forces are likely to prove central as the annual pace of contraction in German Retail Sales moderates to -2.2% in September from -2.6% in the previous month. If this proves to undermine a return to positive price growth in the coming months, however, the European Central Bank may find itself with no choice but to (at the very least) delay raising interest rates for longer than is currently projected.
Meanwhile, UK House Prices are set to grow 1.8% in the year to October, turning positive for the first time since March 2008. While recent surveys including a closely-watched report from online for-sale real estate listing Rightmove have shown similar outcomes, the upswing likely reflects shallow supply rather than a robust recovery in demand. Tellingly, the Royal Institution of Chartered Surveyors (RICS), an industry association for real estate agents, revealed that new buyer inquiries fell for the third straight month in September while the number of for-sale properties per real estate agent has declined by 21.5% from a year ago.
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