Big moves in cable and the AUD today can be linked with comments from respective central bankers.   The dovish minutes of the Fed Sep FOMC have continued to undermine the USD.  However, the disappointingly flat start to stock markets in Europe this morning reigned in risk appetite and allowed the USD some reprieve.  Whether or not EUR/USD takes a step closer to the 1.500 level this afternoon could depend on the tone of today's earnings report from Goldman and Citigroup. 

Today's FT report citing comments from the BoE's Fisher has been linked with the better tone of the pound today.  Fisher's confidence with respect to the impact of QE has led to speculation that the program may be paused in Nov causing a squeeze in short sterling positions.  While yesterday's better than expected labour market data support a more confident outlook on the UK economy, it remains the case that the recovery in the production sector appears to be stalling and Q3 growth may be flat at best.  Against this backdrop, the possibility of more QE in November likely remains on the table and this threat could yet thwart the ability of the sterling recovery to extend significantly in the coming weeks.  Cable reached a high of USD1.6217 this morning, EUR/GBP dipped to just above 0.9200. 

Comments from RBA Governor Stevens that the RBA cannot be timid in raising rates cemented the view that the RBA will hike interest rates again in November.  Expectations for a Nov hike was already widely held given recent improvements in consumer confidence and employment data. Nevertheless the AUD found further support overnight with risk appetite also whetted by yesterday's rise in stocks.  As stock markets failed to push significantly higher into European hours, the rally in the AUD stalled under the 0.9230 level, with the AUD retreating into the approach of the US open. 

The NZD has outperformed the AUD on the back of better than expected Q3 CPI.  This registered a far stronger than expected 1.3% q/q which has underpinned the perception that the RBNZ may have to bring forward the first rate hike of the cycle.   Tomorrow brings the release of Canadian Sep CPI.  The market is expecting CPI to rise by 1.4% y/y.  Strong data will enhance speculation that the BoC could be hiking interest rate by year end.  This morning USD/CAD has retreated from the 1.0210 level in tune with the pull back in the AUD and the flat tone in stocks. 

The release of Chinese Q3 reserve data showed stunning growth of USD141 bln, the largest quarterly gain on record.  US data suggests that China remains a strong buyer of US treasuries. 

Earnings season remains a prime focus for this afternoon in particular the Goldman and Citigroup earnings.  These results could determine whether a move to EUR/USD1.500 is a realistic target for this week.  US CPI data is also key.  However, this data is likely to confirm that deflation is still as much of a problem for the Fed as inflation.  Headline CPI is expected at -1.4% y/y.  Empire manufacturing, Philly Fed and initial claims data are also due for release.