The US dollar strengthened initially overnight and then gave back some of its gains after the release of U.S. CPI data and lower than expected housing starts.  CPI came in -0.2 percent and U.S. housing starts declined 10.6 percent in October, to an annual rate of 529,000 units.  The lackluster figures suggest a U.S. recovery will be slow and will continue to drag on the overall global recovery.

The market will look towards tomorrow's releases of Initial jobless claims and the Philadelphia Fed. survey for further direction into the US economy.  It is expected that jobless claims will come in at 502,000 in line with expectations and the manufacturing survey should come in at 12.3.

The euro pared gains against the dollar but is still struggling to break above 1.50. The 50-day moving average of 1.4792 continues to hold, while the October high of 1.5063 is the first major level of resistance.

Sterling initially rose against the dollar but succumbed to market pressure after the release of the Bank of England minutes showed a split in the decision to increase asset purchases by 25 billion pounds at its meeting earlier this month.  Among the Monetary Policy Committee members one called for a 40 billion pound increase, while another called for no increase at all.  The news that the liquidity program may not go away any time soon and could even be increased, prompted analysts to resume a dovish outlook on UK interest rates.

The Japanese yen tested a key psychological level today holding just above 89.00.Look for the currency pair to continue to trade within yesterday's range with technical support moving the currency pair lower.  The market will look towards a Bank of Japan meeting tomorrow, but rates will most likely remain on hold at 0.1 percent.  

The Canadian dollar initially rose against the greenback, but couldn't sustain its momentum despite record gold prices overnight and a move in oil above $80 a barrel.  In other news, the CPI index came in stronger than expected, but the report is not expected to sway the Bank of Canada from holding its key interest rate at a record low of 0.25 percent.

The Australian dollar came off of its recent highs due to profit taking, but remains well bid moving forward as it's one of the few currencies trading backed by interest rate hikes from the Reserve Bank of Australia (RBA).  Most analysts and investors expect the RBA to raise rates by 25 basis points to 3.75 percent next month.

The New Zealand dollar followed its Aussie counterpart holding just off recent highs.  Look for NZD/USD currency pair to test .7390 if equity markets remain under pressure overnight.  

 

Indicative rates:

EUR/USD

1.4997

USD/JPY

88.98

GBP/USD

1.6790

USD/CAD

1.0464

USD/MXN

12.9661

USD/CHF

1.0060

AUD/USD

0.9265

NZD/USD

0.7432

10-Year Treasury Note Yield:  3.353%

Dow Jones Industrial Average:  10,391.32 -46.41