The USD has recovered slightly throughout the day, with the DXY managing to grind back to 75.40 as equity markets erased early gains. Much of the morning data was ignored by FX markets, German Producer Prices for Sep were much lower than expected (-0.5% MoM vs. -0.1% expected), and UK public finance data showed borrowing hit a record high last month. Nevertheless, the USD found itself under pressure as earnings releases continued to beat estimates, edging European equity markets and US stock futures higher. EURUSD has twice pushed above 1.4990 today but failed to break the psychologically important 1.5000 levels, and it was noticeable that the effect of good earnings releases had significantly less impact on sentiment this time around.

As we moved into the US morning, it was clear that the USD sell-off was losing its tenacity, and this was followed by very poor economic releases from the US which dented risk appetite somewhat. PPI data for Sep showed a -0.6% change MoM vs. expectations of 0.0%, whilst both Housing Starts (590k vs. 610k exp.) and Building Permits (573k vs. 595k exp.) also disappointed. The reaction was muted at first, but after the BoC rate announcement (unchanged at 0.25%) and accompanying dovish statement, USDCAD rallied sharply and led a USD resurgence against the other major currencies. The key takeaway statement from the BoC was a reiteration that rates were expected to stay at 0.25% throughout 2010 as inflation risks continued to lie to the downside. The statement completely shut the door on recent speculation that they might bring forward their schedule of monetary tightening to Q1 next year, a theory that had helped CAD strengthen markedly in the last fortnight. The ensuing unwind took out resistance at 1.0440 with ease and set off stops all the way to1.0500. It has since broken through to 1.0520 (at the time of writing), targeting 1.0560 next resistance. The aggressive move along with a downturn in equity markets has dragged all other majors along with it; forcing EURUSD to lows at 1.4885 (last) and AUDUSD back below 0.9200 to 0.9187 lows. Both gold and silver have tracked EURUSD's tumble and after taking out stops through $1059 and $17.80 respectively, gold is now down a percent on the day at $1054 and silver down over 2% at $17.50.

Looking ahead to tomorrow's session, there is a very light data calendar, but considering the recent GBP strength there will be a lot of focus on BoE Minutes and UK CBI Industrial Trends. The US has no headline data but we will see the release of the latest Fed Beige Book.

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