One Stop Centre of Financial Market Trading blog

Previous session overview

The Asian market Wednesday witnessed a something of a rarity recently a rising dollar.

From early in the day, the U.S. currency strengthened gradually after new signs emerged overnight that the U.S. Federal Reserve's "QE II" second-round quantitative easing won't be a supertanker. As well, slightly weaker-than-expected inflation numbers from Australia hammered that country's currency.

The dollar started the Asian day at around JPY81.33, then climbed steadily through the day, with a blip higher on the Australian news.

By mid afternoon the greenback hit a high for the day at JPY81.77. At 0450 GMT it was quoted at JPY81.65. This compared with JPY81.47 in late New York trade.

The latest sign that the Federal Reserve story may have been oversold was news in The Wall Street Journal that the Fed is likely to unveil a Treasury bond purchase program of a few hundred billion dollars. While not exactly chump change, there had been escalating expectations the buying spree could total more than USD1 trillion.

The Australian dollar weakness also hit the risk sensitive euro, which fell to USD1.3824 from USD1.3855 in late New York trading and JPY112.86 against JPY112.90. The Australian dollar plummeted and short-end bond futures surged Wednesday after Australia's third quarter inflation report came in below expectations.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 77.828 from 77.675.

The Pound hit the day's high against the US dollar and the euro after surprisingly strong economic growth data and a vote of confidence in the government's management of the economy from ratings agency S&P. Data showed the UK economy grew 0.8% in July-September, twice as fast as forecasts.

Market expectation

The U.S. dollar is performing well against majors after the Australian dollar weakened earlier on benign Australia inflation data.

Investors are unwilling to keep the euro near USD1.40 based on the uncertainty of the Nov. 2 U.S. elections and the Nov. 2-3 Federal Reserve meetings.

Indeed, the general view up to Wednesday was that unless Japan backs its talk against a strong currency with fresh intervention, the greenback could slide below JPY80.00, and possibly break its record low of JPY79.75 in the coming sessions. On Monday, the dollar fell to JPY80.41, its lowest since April 1995.

But as of Wednesday, the dollar's day of reckoning when it might go below its record seems a little further off.

European stocks are expected to open lower Wednesday, following weakness in Asian markets and an uninspiring U.S. session. Investors are also seen as being wary of taking new positions ahead of next week's Federal Reserve meeting.

Oct 27	Count.	Event	For	Unit	Imp.	Act.	Cons.	Prev.
00:00	DE	CPI (Prelim)	Oct	% y/y			1.3	1.3
00:00	DE	CPI (Prelim)	Oct	% m/m			0.1	-0.1
00:00	EU	ECB and Central Bank of Cyprus hold Eurosystem Seminar with Mediterranean Central Banks (27th-28th Oct)
00:00	JP	BoJ Deputy Governor Nishimura speaks at International Association of Deposit Insurers conference
00:00	SE	Riksbank Deputy Governor Oberg speaks on the interest rate decision and Monetary Policy Report at the West Sweden Chamber of Commerce and Industry
00:00	SE	Riksbank Deputy Governor Ekholm gives speech on the interest rate decision and Monetary Policy Report at SEB in New York
00:00	SE	Deputy Governor Svensson debates how our view of central banks has changed as a result of the latest financial crisis at theCEPR/ESI conference (27th-28th Oct)
00:00	JP	BoJ Deputy Governor Nishimura speaks to the International Association of Deposit Insurers
00:30	AU	Trimmed Mean inflation	Q3	% q/q		0.6	0.7	0.5
00:30	AU	Weighted Median inflation	Q3	% q/q		0.5	0.7	0.5
02:00	NZ	NBNZ Business Confidence	Oct	index				13.5
06:45	FR	Consumer Spending	Sep	% m/m			0.4	-1.6
06:45	FR	Consumer Spending	Sep	% y/y			-0.3	1.2
07:00	ES	Retail Sales	Sep	% y/y				-2.5
07:30	IT	ISAE Business Sentiment	Oct	index			98.5	98.4
09:00	IS	CPI	Oct	% y/y			3	3.7
09:00	IS	CPI	Oct	% m/m			0.4
09:00	EU	ECB Council member Costa speaks on the Portugese economy
12:00	NO	Norges Bank interest rate announcement followed by press conference @12:45
12:30	US	Durable goods orders	Sept	% m/m			2	-1.5
12:30	US	Durables ex defence	Sept	% m/m				-1.2
12:30	US	Durables ex transport	Sept	% m/m			0.5	1.7
13:00	BE	GDP (Prelim)	Q3	% q/q				0.9
13:00	BE	GDP (Prelim)	Q3	% y/y				2.4
14:00	US	New Home Sales	Sep	k			300	288
20:00	NZ	RBNZ Official Cash Rate announcement
23:50	JP	Large Retailers sales	Sep	% y/y			-2.5	-1.8