USD – The dollar consolidated within its recent ranges overnight as divergent stock and commodity markets weigh a bit on the USD’s “safe-haven” appeal.  Nevertheless, comparatively slow economic growth elsewhere in the world continues to provide support for the dollar as the US economy outperforms most of its peers.  Data released this morning showed that inventories at US wholesalers gained at a slower pace than in the previous month as sales advanced.   Stockpiles grew by 0.5% in September after gaining by 0.7% in August with sales surging 0.9% after a 0.2% decline in the previous reading.  Investors will also take note of the Fed’s Beige Book – an assessment of regional industrial activity – due later this afternoon.  However, with just two FOMC meetings left before the end of the year, and with QE3 already in place, today’s Beige Book results will likely have a limited impact on the FX market.    Consequently, the dollar will remain within its well-worn ranges today with further direction likely coming from developments in the ongoing Eurozone debt crisis.

EUR – The euro is marginally higher this morning, paring early declines despite the continued lack of coordination between Eurozone leaders.  Regional finance ministers have failed to reassure investors that the three-year old debt crisis will be contained, but better-than-expected economic data has led the common currency higher.  Italian and French industrial production both surged higher, rising by 1.7% and 1.5% respectively while CPI readings remained flat throughout the region. Technical trading has also provided support for the EUR, with the EUR/USD pair failing to make a convincing break below its 200-day MA, currently at 1.2867.  Meanwhile, talks in Greece are set to wrap up with a recent €13.5B in fresh budget cuts likely having been enough to secure the next installment of their “bailout” package.  However, while the Troika may sign off on the next piece of aid, regional finance ministers have put forth an exhaustive list of 89 policy steps that they would like Greek leaders to commit to before a summit on October 18th.  The new demands have sent thousands of unemployed Greeks into the streets of Athens, venting their frustration with the country’s leaders and their foreign creditors.  The EUR’s upside will thus likely remain limited in the near term as outlook for the region deteriorates.

GBP – The pound is mixed this morning, falling against the EUR, but snapping a three-day slide versus the USD.  The modest improvement comes after a private sector estimate of GDP suggests that the British economy returned to growth in Q3.  However, the modest return of risk appetite is causing the pound to give up some of its recent gains vs. the EUR.

JPY – The yen is flat this morning as investors remain sidelined ahead of a G7 summit in Tokyo tomorrow.  PM Noda has reiterated the government’s willingness to take decisive action against “one-sided” and “disorderly” gains in the yen.  However, most investors are likely waiting for any BoJ intervention as a good opportunity to buy relatively cheap yen with the ongoing European debt crisis and slowing global growth providing ongoing support for the “safe-haven” currency.

Commodity Currencies – The commodity linked currencies are mixed with the CAD and MXN both falling while the AUD and ZAR strengthen.  Raw goods are similarly mixed with oil extending its recent gains to $93.25/bbl while gold and copper fall.  The CAD is marginally lower, despite the rising price of oil – Canada’s primary export – as apparent slowing global growth saps demand for riskier assets.  Similarly, the MXN is slightly lower, but recent volatility has eased as an increase in foreign capital inflows offsets fears of a global slowdown.  On the other end of the spectrum, the AUD has rebounded from its recent multi-month lows on signs that an increasing number of global central banks are adding the currency to their reserves.  The ZAR proved to be the best performer after one of the nation’s largest labor unions agreed to go back to work.


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