The combination of risk appetite and dovish comments from the Fed's Kohn has lifted EUR/USD to a 14 mth high of 1.4910 this morning. On the back of the weak USD, gold touched the 1070.00 level this morning before being subjected to some profit-taking. Cable pushed back above the 1.600 level supported by better than expected UK jobs data and AUD/USD is holding around 0.9150 as optimism in Australian economic prospects receives another boost.
News that Chinese exports suffered their smallest decline in 9 mths has led to a wave of speculation that Chinese growth data may be revised higher. The news spilled over into optimism in other Asian stocks markets and into the AUD. Australian exports to China in the first 8 mths of this year are up 37% y/y. This demand has helped Australia avoid recession this year and helped spur the overnight release of Australian Oct consumer confidence to a 2 year high in spite of the recent RBA rate hike and expectations that the RBA could raise rates again in Nov.
Sterling has also had a decent day. The failure of EUR/GBP to push above the 0.9400 level yesterday had lead to some short-covering pressures in the pound. Buying was extended on this morning's news that the jobless count in Sep rose by a much lower than expected 20.8K following a downwardly revised rise of 23K in August. The Aug ILO unemployment rate remains at 7.9%, lower than the expected figure of 8.0%. This data brings some reassurance that the UK economy stabilised in Q3. That said, the market is expected GDP data to potentially show little to no grow in the quarter suggesting scope for a strong rally in the pound is limited near-tern.
Dovish comments from the Fed's Kohn yesterday that ''uncertainty'' in the economy was ''quite high'' undermined last week's speculation that the Fed could be preparing the market for a rate hike. US CPI data due for release tomorrow is likely to underscore the fact that inflation is absence in the US economy and thus should do little to support the USD. Ahead of that, today's release of retail sales will provide a good gauge of the relative strength of the US recovery. The release of the FOMC minutes should also clarify the Fed's outlook. Weaker than expected August Eurozone industrial production data (+0.9% m/m) will keep alive the prospect of further verbal intervention against EUR strength from Euroarea officials. Technically, EUR/USD remains in an uptrend.
USD/CAD has consolidated around the 1.0270 level this morning following yesterday's remarks from PM Harper that BoC Governor was concerned with a ''too rapid'' rise in the CAD. Harper also endorsed that perception of relative strength in the Canadian economy which should underpin rate hike speculation and suggests downside potential in the CAD is limited.
The JPY is weaker across the board on the back of the rise in risk appetite. As expected the BoJ left interest rates unchanged overnight. Consumer confidence data, though weaker than expected, registered a 23 year high suggesting the recovery remains on course. This data coincides with the comments from Finance Minister Fuji that Japan must avoid selling deficit-covering bonds as ''much as possible'', in order to regain the confidence of the bond market in the face of the massive public debt.
US retail sales and the minutes of the Sep FOMC will be key this afternoon.