Market Brief

      There has been some consolidation in FX overnight after yesterday’s USD rally pushed EURUSD to threaten its 12 month uptrend and test major resistance at 1.4810. The catalyst appears to have been comments from the Fed’s Yellen that suggested higher rates could help stem “damaging” leverage; yet another piece of rhetoric that has unnerved short USD positions after Bernanke’s comments the day before – as such, this latest test of the downtrend comes without the pair having even come close to testing the upside resistance at 1.5060, a worrying factor for EURUSD bulls. European and US data from earlier in the session was mixed and had a muted impact on FX markets following their release. US PPI came in lower than estimates (0.3% MoM vs. 0.5% expected) and Industrial Production also disappointed at 0.1% in October (against consensus for 0.4%), however TIC data highlighted a massive surge in foreign investment in US securities in September. What was significant about this latest EURUSD sell-off was the simultaneous rally in gold to hit new highs at $1144; completely undermining the correlation that has existed between the two asset classes since March.

      One of the better performing currencies yesterday was GBP; after UK CPI data beat estimates at 0.2% MoM, 1.5% YoY (forecast: 0.1% MoM, 1.4% YoY). The crucial event for GBPUSD direction from here will be today’s release of the BoE Minutes, where once again, the particulars of MPC members’ opinions on the continuation of QE will be under scrutiny. We feel that the bias of risks lends itself to further GBP upside to 1.7000 levels (especially if there is serious consideration of an end to the stimulus programme), but obviously if the statement strikes a more dovish tone then a revisit of 1.6650downside support is possible.

      Overnight equity markets across Asia have put in a variable performance, but gold remains elevated at $1139 levels, and silver too is holding up well at $18.40. From here we believe the rally in gold has further upside to $1180-1200 levels, but it seems unlikely that EURUSD will be able to follow suit with such vigour. The European data calendar is light today, expecting only Eurozone Construction Output, but the US session should be slightly more compelling with both Canadian and US CPI figures due. The US figures should confirm that inflation remains subdued, with forecasts looking for a -0.3% reading YoY, up from -1.3% last month.

G10 Advancers and Decliners vs USD
 Global Indexes Current Level % Change
Nikkei 225 Index9'676.80- 0.55
Hang Seng Index22'840.33- 0.32
Shanghai Index3'303.23+ 0.62
FTSE 100 Index5'362.65+ 0.31
DAX Index5'809.09+ 0.53
SMI Index6'405.75+ 0.46
S&P future1'106.70- 0.06
 World Markets Current Level % Change
Gold1'141.43+ 0.01
Silver18.45+ 0.11
VIX22.41- 2.10
Crude wti79.54+ 0.51
USD Index75.19- 0.19
 Todays Calender Estimates Previous Country / GMT
Current account, € bn (sa) Sep----1.3EUR/09:00
BoE MPC minutes, QE vote Nov7-29-0GBP/09:30
Construction output sa, % m/m Sep----0.4EUR/10:00
CBI industrial trends, net balance Nov----51GBP/11:00
CPI, % m/m (y/y) Oct0.1 (0.1)0.0 (-0.9)CAD/12:00
CPI, % m/m (y/y) Oct0.2 (-0.3)0.2 (-1.3)USD/13:30
Housing starts, thous Oct600590USD/13:30
Building permits, thous Oct580575USD/13:30
Currency Tech

R 2: 0.9475
R 1: 0.9405
CURRENT: 0.9320
S 1: 0.9210
S 2: 0.9190

R 2: 1.0800
R 1: 1.0660
CURRENT: 1.0505
S 1. 1.0410
S 2: 1.0380

R 2: 135.05
R 1: 134.45
CURRENT: 132.90
S 1: 132.50
S 2: 131.75

R 2: 13.265
R 1: 13.062
CURRENT: 13.022
S 1: 12.950
S 2. 12.855