• USD: Lower, Empire Manufacturing falls, retail sales rise, business inventories fall less than expected
  • JPY: Higher, GDP rises at the fastest past in more than two years
  • EUR: Higher, EU CPI falls by 0.1% y/y, China not ready to let Yuan rise
  • CHF: Higher, tracking risk sentiment, import prices and investor sentiment decline
  • GBP: Higher, Rightmove house prices fall 1.6%
  • CAD and AUD: AUD & CAD higher, gold trades at record high, Canada's manufacturing shipments rise


Overview     
USD starts the week lower pressured by improving risk appetite as global equity markets rally, crude prices trade higher and gold trades at a new record high. The equity market rally and the rally in crude and gold are attributed to the APEC pledge to keep expansionary fiscal and monetary stimulus policies until the global recovery is durable. USD was also pressured by report of stronger than expected Q3 GDP from Japan, lack of agreement at the APEC meeting over Yuan revaluation and hawkish comments from ECB's Weber. Japan's Q3 GDP rose at its fastest level in two years. US and Chinese officials failed to agree on the need for Yuan and the APEC communiqué made no reference to FX levels. ECB's Weber says that the EU must start plans to withdraw fiscal and monetary stimulus. GBP underperformed pressured by report of drop in November house prices. Commodity currencies traded higher tracking firm commodity prices and improving risk appetite as equity markets rally. US economic data was mixed with Empire Manufacturing Index coming in much weaker than expected and retail sales rising more than expected. The retail sales rise however was fueled primarily by auto sales and the impact of the cash for clunkers program which is now expired. Business inventories posted a smaller decline than expected. USD sentiment remains negative on optimism about the global recovery.

Today's US data:

November Empire State Manufacturing Index falls to 23.51, a reading of 31 was expected. October retail sales rose 1.4%, a reading of was expected 0.4%. Retail sales rose just 0.2% ex-autos. October business inventories fell by 0.4%, a 0.6% decline was expected.

Upcoming US data:
On November 17th October PPI will be released expected to rise by 0.4% compared to -0.6% last month. October industrial production, capacity utilization and the November NAHB index will also be released on November 17th. Industrial production is expected to rise by 0.4% compared to 0.7% last month, capacity utilization is expected at 70.8 compared to 70.5 last month and the NAHB index is expected 19 compared 18 in October. On November 18th October CPI will be released expected unchanged at 0.2% along with October housing starts and building permits. The housing starts are expected to rise to 600k from 590k last month and building permits are expected at 580k compared to 573k last month. On November 19th initial jobless claims for week ending the 11/14 will be released expected at 497k Compared to 502K last month. October leading indicators and November Philly Fed will also be released on November 19th. Leading indicators are expected to rise by 0.4% compared to 1% last month and the Philly Fed is expected at 12.5 compared to 1.5 last month.

JPY
JPY traded higher supported by report of stronger than expected Q3 GDP and report that CAPEX spending rose for the first time since Q1 of 2008. Japan's Q3 GDP rose 1.2% and CAPEX rose 1.6%. The Q3 GDP was expected to rise by 0.7%. Japanese officials downplayed the Q3 GDP report indicating that economic conditions are picking up but downside risks remain for the economy and signs of deflation continue. JPY gains were limited by report that the US and China failed to agree on Yuan revaluation. JPY traded higher in Friday's trade supported by report of the sharp upward revision in Japan's industrial production and Yuan revaluation rumors. JPY gains were also limited by mixed price action in cross trade with EUR/JPY supported by the failure of the US and China to agree on exchange rates at the APEC meeting Sunday. The failure to agree on Yuan revaluation means that rebalancing of global trade will require a further decline in the USD versus the majors as China elects to keep the Yuan rate stable.

On November 17th September tertiary activity will be released expected at 0.4% compared to 0.3% last month. On November 18th revised September leading indicators will be released expected at 0.8% compared to 2% last month. On November 19th September all industry activity will be released expected at 0.6%.

Key technical levels to watch in USD/JPY include support at 88.83 the October 14th low with resistance at 90.86 the November 6th high.

 



EUR
EUR traded higher supported by report that the APEC communiqué left out reference to FX rates and in reaction to hawkish statements from ECB's Weber. The fact that APEC communiqué did not address USD weakness was seen as a green light to sell the USD because it reduces risk of coordinated support for the USD. In addition, the failure of the US and China to agree on Yuan valuation means that rebalancing of global trade may continue to force the USD lower against the majors. The ECB's Weber says that the EU must start to make plans for the withdrawal of fiscal and monetary stimulus. The EU reported Friday that Q3 GDP rose by 0.4% confirming that the EU economy is emerging from recession. The EU Q3 GDP report may encourage speculation that the ECB will begin to remove stimulus and consider a timeframe for hiking interest rates. Recent statements from ECB officials indicate that the ECB will begin to allow emergency support programs to expire. ECB officials have given no indication that they are in any hurry to raise interest rates. The withdrawal of stimulus and tightening of monetary policy are seen as two separate considerations for the ECB. EUR gains were limited by report of weak inflation. EU October inflation rose 0.2% and fell by 0.1% y/y. EU consumer prices fell for the fifth month in row. The lack of inflationary pressures in the EU should encourage the ECB to maintain steady monetary policy.

On November 17th EU September foreign trade balance will be released expected at -2bln compared to -4bln last month. On November 18th EU September current account will be released expected at -4.8bln and compared to -5bln Last month.

The technical outlook for the EUR is mixed as the EUR fails to trade back above 1.5000. Expect EUR support at 1.4810 the November 5th low with resistance at 1.5017 the November 12th high.

 



CHF
CHF edged higher Monday supported by improving risk sentiment as equity markets rally and APEC pledges to maintain fiscal and monetary stimulus until the global recovery is secured. Last week, SNB's Jordan confirmed that the central bank will maintain steady monetary policy. Jordan noted that low interest rates were needed to support the economic recovery. He went on to express concern about strong CHF but said that recent efforts by the SNB to stabilize the CHF have been successful. Last week's Swiss economic data was mixed with Zew investor confidence posting a decline to 56.4 from 65 in October and producer and import prices declined by 0.4%. This week's Swiss economic calendar includes Tuesday's release of September retail sales expected at 0.2% compared to -1% last month and the trade balance expected at 1.62bln compared to 1.92bln last month. Expect USD/CHF support at 1.0015 the July 15th 2008 low with resistance at 1.0300.



GBP
GBP traded mixed with gains limited by report of a decline in UK house prices. UK November house price index fell by 1.6%. The decline in UK house prices generates concern about the outlook for recovery in the UK economy and the report will likely encourage speculation that the BOE may consider expanding its asset purchase plan. On November 18th, the BOE will release the minutes from its November policy meeting. The BOE elected to expand its asset purchases by £25bln at the November policy meeting. The trade will look at the minutes for clues to whether the BOE is considering further expansion of its asset purchase plan. GBP has been underperforming since last Wednesday's comments from BOE Governor King that a weak GBP will help to boost the UK economy and that he is open-minded about expanding of BOE's asset purchases. King was clearly sending a signal that the BOE intends to maintain low yields for sometime to come and that they central bank is a long way from considering withdrawing stimulus. GBP generally weakens in reaction to news that the BOE is expanding or plans to expand its asset purchase plan. Focus turns to Tuesday's release of UK CPI. The BOE November inflation report indicated that UK short-term inflationary pressures are likely to intensify but overall inflation will remain below the 2% target over the next few years.

This week's UK economic calendar includes the November 17th release of October CPI expected at 0.2% compared to flat last month. On November 18th September CBI orders will be released expected at this -50 compared to -51 last month. On November 19th October money supply and public-sector borrowing will be released. The money supply is expected is to rise by 0.9% compared to 0.8% last month. Public-sector borrowing is expected to widen to 15.062bln from 14.812bln last month.  Also on November 19th, October retail sales will be released expected at 1% compared to 2.4% last month and 1.6850.

The technical outlook for GBP is positive as GBP trades above 1.6700. Expect near-term support at 1.6574 the November 13th low with resistance at 1.6799 for November 11th high.

 



CAD
CAD traded higher supported by rising crude prices and a rally to a new the record high in the price of gold. APEC pledge to maintain fiscal and monetary stimulus generates optimism about the global recovery and fuels demand for equities, commodities and commodity-based currencies. CAD was also supported by report of strong Canadian manufacturing shipments. September manufacturing shipments rose 1.4%. The rise in manufacturing shipments reflects a sharp jump in auto sales. Better than expected Q3 GDP data from Japan and strong US retail sales report adds to improving risk appetite and selling of the USD. Last week, Canada reported a sharp improvement in its trade deficit with exports rising despite strong CAD. The fact that Canada's export sales are rising despite strong CAD may reduce the risk of intervention. It's important to note that the improvement in Canada's manufacturing shipments and export sales mainly reflects improvement in auto sales. This may be an indication that the recovery in manufacturing the trade balance will be temporary CAD price direction will continue to track the direction of commodities and equities.

On Wednesday November 18th October CPI will be released expected to rise 0.1% compared to flat last month. On November 19th September net foreign investment will be released expected at 3.06bln compared to 5.08bln last month along with October leading index expected at 0.7% compared to 1.1% last month and September wholesale sales expected at 1% compared to -1.4% last month.

The technical outlook for CAD is positive as USD/CAD trades below since 1.0600. Look for near-term support at 1.0375 the October 21st low with resistance at 1.0610 the November 10th high.

AUD
AUD traded higher supported by rising commodity prices and improving risk sentiment but today's gains were unimpressive. AUD has been supported by optimism about global recovery and speculation that the RBA will hike rates in December. This speculation sparked an AUD rally to a new high for 2009 last week. Last week Australia reported an unexpected rise in new jobs created. Jobs growth rose by 24.5k in October. The better than expected jobs growth in Australia may intensify speculation that the RBA will hike rates in December. However Australia also reported last week that consumer confidence posted a decline and inflation fell by more than expected. These reports may temper speculation about RBA rate hikes. Focus turns to this week's release of Australia's labor price index. Stronger Australian labor costs would increase speculation that the RBA will hike rates in December. AUD price direction will continue to track the direction of equities and risk sentiment.

This week's Australian economic calendar includes the November 18th release of Q3 labor price index expected unchanged at 0.8%.

The technical outlook for the AUD is positive as the AUD rallies above 9200. Expect AUD support at 9210 the November 12th low with resistance at 9420 the August 1st 2008 high.