Market Brief

Yesterday comments by Fed Chairman Bernanke disrupted FX markets, when he mentioned the USD in his speech at an event at the Economic Club of New York. Since the US treasury is the usual voice of US dollar policy, it caught the market fully off guard. In a knee-jerk reaction, USD buyers hit the market pushing EURUSD down to 1.4880 from 1.4970. The lingering effects of the Chairman’s comments weighed slightly on Asian risk appetite, with regional equity markets broadly lower today. We saw a similar reaction to Bernanke's strong USD comments in the Summer of 2008 and expect a comparable counter reaction (USD selling). While conditions / environment were different in 2008, his comments contained no change in the critical “lower for longer” scheme, investors should move back into risk correlated fx trades today.

      The RBA minutes released today had a slightly dovish tone, which surprised the markets. The AUDUSD was well bid, trading down to 0.9325 as the minutes stated that a further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remains open to question”. We are not reading too much into the statement and still expect a 25bp hike in December, followed by an increase until April.

    In the European Session, Eurozone trade data probably will confirm that the external sector gave the domestic economy a reasonable boost in Q3. Nonetheless, it should highlight the effect that the stronger EUR has had on exports and we expected the rhetoric from policy makers to increase, as the EURUSD approached 1.5000 and above. And in the UK, October CPI should increase to 1.40% y/y, but RPI is likely to remain soft on a y/y basis. External member of the BoE Sentence recently voiced concerns that QE would take longer to filter through the economy and the Inflation Report highlighted the risk of staying ultra loose for too long.

G10 Advancers and Decliners vs USD
 Global Indexes Current Level % Change
Nikkei 225 Index10,354.00- 0.61
Hang Seng Index22,891.69- 0.22
Shanghai Index3,282.89+ 0.23
FTSE futures5,364.00+ 1.62
DAX futures5,785.00- 0.30
SMI Futures6,395.00- 0.46
S&P future1,104.20- 0.18
 World Markets Current Level % Change
Gold1,136.80- 0.21
Silver18.27- 0.62
VIX22.89- 2.01
Crude wti78.71- 0.24
USD Index74.93+ 0.04
 Todays Calender Estimates Previous Country / GMT
SARB Rate Announcement, %7.007.00ZAR / --
San Francisco Fed President Yellen (FOMC voter) sp----USD / 10.30
ECB Executive Board member Stark speaks-----EUR / 14.30
Richmond Fed President Lacker (FOMC voter) speaks----USD / 15.15
Cleveland Fed President Pianalto (FOMC non-voter)----USD / 17.30
Adjusted real retail sales, % y/y---1.0CHF / 08.15
CPI, % m/m (y/y)Oct0.1 (1.5)0.0 (1.1)GBP / 09.30
RPI, % m/m ((y/y)0.1 (-1.0)0.4 (-1.4)GBP / 09.30
Trade balance, € bn (sa)--1.0EUR / 10.00
PPI, % m/m (y/y)0.5 (-1.7)0.6 (-4.8)USD / 13.30
Core PPI, % m/m (y/y)0.1 (1.4)-0.1 (1.8)USD / 13.30
Net long-term TIC flows, $bn--28.6USD / 14.00
Industrial production, % m/m (y/y)0.4 (-6.9)0.7 (-6.1)USD / 14.15
Capacity utilization, %70.870.5USD / 14.15
NAHB housing index1918USD / 18.00
Currency Tech

R 2: 0.9475
R 1: 0.9405
CURRENT: 0.9318
S 1: 0.9317
S 2: 0.9210

R 2: 1.0609
R 1: 1.0575
CURRENT: 1.0484
S 1. 1.0418
S 2: 1.0380

R 2: 135.05
R 1: 134.45
CURRENT: 132.95
S 1: 132.86
S 2: 132.50

R 2: 13.265
R 1: 13.062
CURRENT: 12.995
S 1: 12.950
S 2. 12.855