Asian equity markets are mixed today after US Senate passes China currency bill in a 63-35 vote yesterday. As a result, the Hang Seng is up 0.70% on the day, and the Nikkei s down -0.13% on the day. Interestingly, the Shanghai composite rallied 2.50% seemingly to have shrugged off worries of a trade war. EURUSD bounced around the 1.3583 to 1.3658 range and USDJPY was able to grind higher to 76.72. Yesterday Slovakia's parliament rejected the EFSF enhancements, however; the initial reaction was muted with the EUR weakening only slightly. The lack of concern was prompted by the expectation that Slovakia's parliament is likely to schedule a repeat vote on the ESFS as early as this week. That's said only 55 out of 150 lawmakers voted in favor of the EFSF enhancements. Risk appetite remains firm as the news flow EU and IMF officials suggest that Greece is expected to collect its 6th tranche in early November.
In reaction to the passage of the currency bill through US Senate, China officals stated that the CNY has appreciated considerable (today new high for CNY 115 pips higher at 6.3598) and is now approaching a fair value considering inflation levels. China foreign minister sounded more hawkish stating that the US bill is protectionist and breaches WTO governance. He went on to urge the US House of Representative to reject the unfair legislation. The bill if passed into law, it could be used to punish China (or naother nation) for its undervalued currency with penalties including retaliatory tariffs. That said, the bill needs to be passed by the House and then signed by the President, which at this stage seems unlikely.
There's another relatively light data calendar today, with UK unemployment numbers and Eurozone's Industrial production providing the only scheduled data for European session. In the US session, the focus will be squarely on the FOMC meeting minutes. The UKs Claimant count unemployment rate for September is expected to come out at 24.5k, after last month's 20.3k print. Eurozone's Industrial production for August is expected to print at -0.8% mom, 2.1 yoy, after last month's 0.9% mom, 4.2% yoy read. As for the FOMC minutes, we suspect that the minutes will be in-line with the dovish tone of the accompanying statement. Markets will be searching for addition insight on the loosening monetary policy through operation twist and the surprise decision to reinvest maturing assets into MBS. A strategy, geared directly at supporting the US mortgage borrower. The other interesting insight should be divergence views on loosening and inflation outlook from dissenting votes such as Plosser, Fisher and Kocherlakota.