Dollar loses gains after hitting a new high, Japan in Recession

Good Morning,

- The dollar hit a new high at 117.05 yen, but gave up quickly those gains in extremely volatile trade as the Nikkei extended losses. The Euro lost some ground after hit $1.2577 overnight, but may keep the positive momentum after data on Friday showed the euro zone economy grew more than expected in the third quarter.

- Leaders from the G20 group of nations agreed on Sunday to boost global growth, tackle climate change and crack down on tax avoidance, but ties between the West and Russia showed bad signs over the Ukraine crisis.

- David Cameron has issued a stark message that “red warning lights are flashing on the dashboard of the global economy” in the same way as when the financial crash brought the world to its knees six years ago… “a dangerous backdrop of instability and uncertainty” that presents a real risk to the UK recovery, adding that the eurozone slowdown is already having an impact on British exports and manufacturing.

- Bank of America on EUR/USD: Bofa remains of the view that the USD 6m bull trend is quickly drawing to a close and that a medium-term correction lower is set to unfold. Specifically, BofA now thinks that if the pair manages to stay above 1.2510, this would indicate that the base is in and that the trend has turned. "Indeed, in the weeks ahead, we look for a period of choppy range-trading between the 1.30/1.23 area before the long-term bear trend resumes for 1.1706 and, potentially, below," BofA argues.

- SNB Intervention Is Coming? – Nomura: We are edging closer and closer to the 1.2000 floor and SNB intervention is an increasing risk, says Nomura. "Incrementally easier monetary policy in the eurozone has been pushing EUR/CHF towards the 1.20 floor, and the Gold Referendum (30 November) and the ECB meeting (4 December) may put further appreciation pressures on the Swiss franc relative to the euro," Nomura argues. "We think the SNB stands ready to intervene in significant size, although we don’t think the amounts comparable with the 2012 intervention will be needed in the near term. On a six-month horizon, we view the floor as credible, but SNB interest rate action may be required to avoid the need for more permanent FX intervention," Nomura adds.

- Bank of England Governor Mark Carney, indicated they are focused on downside risks to inflation as the central bank emphasizes the reasons for keeping loose monetary policy. “We’ve got huge disinflationary forces coming from our trade partners, particularly in Europe, and commodity prices have gone down quite sharply,” Carney said in an interview.

- Japanese Prime Minister Shinzo Abe told the meeting of 20 major economies that he was waiting for third quarter growth data before deciding whether to go ahead with a second planned hike in the consumption tax, a government official said on Sunday.

-Japan’s economy has fallen into recession after contracting 0.4 per cent in the September quarter. It’s the second-straight quarter of contraction and a huge blow to Tokyo’s bid to turn around years of laggard growth. The country’s gross domestic product shrank 0.4 per cent in the July-September quarter, or an annualized rate of 1.6 per cent, underscoring how an April tax rise dented growth and weighing on the chances of a second levy hike next year. The market’s median forecast was for a 2.47 per cent annualized growth rate, according to a survey of some 40 economists conducted by the Japan Center for Economic Research.

- Hedge funds extended their fastest exit from gold this year, cutting bullish gold wagers for a third week. The net-long position in New York futures and options fell 14 percent, U.S. government data show. Holdings tumbled 49 percent over three weeks, the most since December. Assets in exchange-traded products backed by the metal dropped to the lowest since 2009.

- China’s bad loans jumped by the most since 2005 in the third quarter, fueling concern that a cooling economy will be further weakened as banks limit lending to avoid credit risks.

- Watch today: EU exports, NY Fed Index, US production.

Have a nice Week !