FX Highlights

  • USD and JPY are trading higher supported by a spike in risk aversion as the Shanghai index falls 3% on concern about overcapacity in China, Japan reported a record fall in wholesale prices, EUR mixed despite report of weak EU industrial output supported by gains in crosstrade to the GBP and rising versus the Russian ruble, GBP pressured by BOE forecast that inflation may fall below 1% and expects a slow UK recovery, UK unemployment a 14 year high, commodity currencies pressured by concern about growth outlook in Asia and weaker equity market trade, consumer confidence rises in Australia
  • Focus turns to today's FOMC policy announcement, the release of US trade balance and Canada' trade balance and New House Price Index, the FOMC is expected to continue with quantitative ease and hold rate policy steady, the trade will be looking to see whether the Fed extends quantitative ease or signals the timeframe for possible exit from quantitative ease
  • Japan's July corporate goods price rose 0.4%, but fell at a record annual pace, June industrial production revised to 2.3%, BOJ Gov. Shirakawa says it will take time for the economy to return to sustainable growth, JPY higher
  • Daily Telegraph carries a report which warns that credit tightening and overcapacity in China threatens China's economy, CIT on verge of bankruptcy, Atticus capital closes two funds, Shanghai index falls 3%, Yuan mixed
  • Australia's August consumer confidence index rises 3.7% to a two-year high, Q2 wage price index rises 0.8%, AUD lower
  • EU June industrial output falls 0.6%, ECBs Liikanen says next few months will show the funeral economy has passed the worst of the economic crisis, EUR flat
  • UK June employment rate rises to 7.8%, claimant count rises 24,900, average earnings rise 2.5%, BOE says inflation likely to drop below 1% in the fall, BOE's King says UK recovery could be slow and protracted, GBP lower
  • Russian ruble drops to a six-month low versus the EUR on concern about weakening Russian economy, the Russian central bank is intervening
  • Three month dollar and sterling LIBOR rates hit record lows
  • US mortgage applications fell last week as interest rates rose to the highest level since June
  • The Financial Times reports that speculation is growing over the timing of turning point for US economy
  • Nobel prize-winning economist Spence says USD unlikely to be replaced as world reserve currency
  • US equity markets set to open mixed, European equities mixed, Nikkei closed 155 points lower

Upcoming Events

  • US- Wednesday, June trade balance will be released expected -28.45 bln compared to-25.96 bln last month, FOMC policy announcement
  • CAN- Wednesday, June Trade balance will be released expected at C$-0.80 bln compared to C$1.42 bln last month along with June Housing Price Index expected flat compared to -0.1% last month