Market Brief

The G20 communiqué released over the weekend didn’t mention FX, which cleared the way for risk appetite to surge. Asian regional equity indexes moved higher, with Hang Sang up 1.14%. Spot Gold surged to $1108.40 today, EURUSD followed up to 1.4986 and GBPUSD hit 1.6801. The risk correlation was tested on Friday, as the US released another disappointing set of payrolls (came in at -190k vs. -175k exp ) and unemployment numbers (10.2% vs. 9.8 exp). The high unemployment rate caused a knee jerk reaction of USD safe have buying, but was quickly reversed into USD sell as we had expected. The market rapidly changed their view that the weak US labor numbers were not a sign of impending collapse, but rather argued for the Fed to keep monetary policy ultra loose for an even longer period of time. In addition, after last week's three major central bank decision (Fed, BoE & ECB) it's clear that they will not tighten policy until recession and deflation risk are completely out tof the picture. So, from the markets' and our perspective, trading will be driven by the liquidity aspect of low rates, creating an environment to acquire high beta currencies. In this light calendar week, it will be important to see what Fed officials have to say following the worrying labor data, with Lockhart, Yellen, Rosengreen, Tarullo, Fisher and Evans all due to speak. Any signals of a decline in hawkish rhetoric should keep the USD under pressure. Today in Australia, home loans outstanding rose by 5.5% m/m in September well ahead of the market expectations. The RBAs December meeting is still a close call and heavily data dependant. While 25bp is currently priced, we believe this result is conditional on Thursday unemployment data which is expected to tick higher to 5.8%. In the UK, the highlight of the week will be the Inflation Report. Markets are leaning towards the MPC indicating a pause rather than a full stop in QE. Inflation is likely to rise above 2.0% as indicated by the BoE (a reflection of higher energy prices and reversal of last year’s reduction in VAT). However, this will not cause members to become overly hawkish given the weakness in the underlying domestic economy.

G10 Advancers and Decliners vs USD
 SEK1.77width=120
 NZD1.59width=107.796610169492
 NOK1.25width=84.7457627118644
 AUD1.07width=72.5423728813559
 GBP1.00width=67.7966101694915
 CAD0.88width=59.6610169491525
 DKK0.84width=56.9491525423729
 EUR0.82width=55.593220338983
 CHF0.79width=53.5593220338983
width=20.3389830508475JPY-0.30 
 Global Indexes Current Level % Change
Nikkei 225 Index9,808.99+ 0.20
Hang Seng Index22,207.55+ 1.73
Shanghai Index3,175.59+ 0.36
FTSE 100 Index5,196.38+ 1.04
DAX Index5,559.50+ 1.29
SMI Index6,359.13+ 1.04
S&P future1,073.40+ 0.67
 World Markets Current Level % Change
Gold1,106.38+ 1.02
Silver17.70+ 1.78
VIX24.19- 4.87
Crude wti78.75+ 1.70
USD Index75.20- 0.81
 Todays Calender Estimates Previous Country / GMT
Industrial production nsa, % y/y-7.4-6.3TRY / 08.00
GER Industrial production, % m/m (y/y) Sep1.01.7,-17.4EUR / 11.00
CPI, % m/m Oct0.440.50MXN / 15.00
Current account, JPY trn Sep1.511.17JPY / 23.50
Currency Tech

AUDUSD
R 2: 0.9475
R 1: 0.9330
CURRENT: 0.9263
S 1: 0.9090
S 2: 0.9025

USDCAD
R 2: 1.0960
R 1: 1.0872
CURRENT: 1.0644
S 1: 1.0595
S 2: 1.0500

EURJPY
R 2: 135.90
R 1: 135.70
CURRENT: 134.85
S 1: 133.25
S 2: 132.50

USDMXN
R 2: 13.535
R 1: 13.455
CURRENT: 13.341
S 1: 13.269
S 2: 13.205