European stocks markets failed to pick up the positive lead set by their Asian counterparts. Another wave of concerns that 2009 has been a 'tough' year stoked concerns about corporate performance and encouraged the USD to move higher vs the EUR and the JPY. Selling in the JPY had been triggered by comments from Japanese Finance Minister that the government may take action in the markets. These remarks have directly countered the rise in market opinion that Japan's new government may not be willing to intervene in the fx market. The better tone in the USD also followed a reiteration by ECB President Trichet of support for the US government's strong USD policy, though the impact of his remarks on EUR/USD will have been countered by his comments yesterday which referred to exit policies from the ''exceptional measures'' taken by the ECB. While the AUD has also moved lower vs the USD, the unit has fared relative well on the back of another bout of rate hike speculation and on comments from the RBA's Richards that Australian house prices may surge too fast. The downward correction in AUD/USD ran into support above 0.8710.
Sterling has suffered a late morning boost on reports of a large GBP buy order at the 11:00 BST fix. This news coincided with the release of a significantly improved CBI distributed trades report. The index of reported sales jumped to +3 in Sept from -16 in Aug. If the improved tone of this data is reflected in official retail sales numbers for the month, the chances of the UK reporting positive growth in Q4 this year will be significantly boosted. UK data released earlier in the morning had created little reaction. In line with expectations Q2 GDP data was revised to -0.6% q/q from a previous estimate of -0.7% q/q. Net consumer credit in Aug fell by -0.3 bln as consumers paid down debt. This marks the start of a more healthy position of UK consumer balance sheets by does not tie in well with the pickup in consumption suggesting the economic outlook will be very vulnerable when fiscal incentives dry up. Also worrying is the modest 0.1% m/m rise in M4 which does not say much for the success of QE. Cable has been squeezed back to the 1.5940 level from a low of 1.5830. EUR/GBP has dropped down below 0.9140.
US Sep consumer confidence data are due this afternoon.