The dollar trade stable on Monday

Good Morning,

- The dollar trade stable on Monday, after solid economic data on Friday restored some calm to the financial markets, prompting equities to rally back from last week’s deep losses and triggering a rise in Treasury yields.

- On Friday, data showed U.S. consumer sentiment come in stronger than expected, restoring some faith in the U.S. economy and calming nerves after a week that saw Wall Street buffeted and Treasury yields fall sharply on global growth concerns.

- The dollar index rose to 85.209, after dropping to a three-week low of 84.472 last week.

- The Federal Reserve should end its bond-purchase program as planned at its policy meeting this month, John Williams, president of the Federal Reserve Bank of San Francisco, said in an interview with The Wall Street Journal late Friday. Mr. Williams–whose views are often in line with top Fed officials including Chairwoman Janet Yellen–also said his outlook for the U.S. economy hadn’t fundamentally shifted lately, despite turbulence in financial markets. He expects the Fed to start raising short-term interest rates by the middle of 2015.

- In September 2014 the German index of producer prices for industrial products fell by 1.0% compared with the corresponding month of the preceding year. In August 2014 the annual rate of change all over had been –0.8%.

- German Finance Minister Wolfgang Schaeuble told a newspaper on Sunday that he wanted to increase investment spending and improve competitiveness in Europe's biggest economy but not at the expense of achieving a balanced budget next year. A raft of gloomy economic data and expectations of a slowdown in German growth has contributed to jitters on world markets and Schaeuble is under pressure to spend on roads, railways, broadband networks and energy grids to help growth.

- Morgan Stanley on US dollar: Using USD setback to buy, outlook bullish. Watch: Fed’s Yellen Speech, Housing Starts, Univ. Michigan Conf., CPI. We remain bullish on USD and see the recent setback as providing a buying opportunity, especially against the high yield currencies. Falling inflation expectations and weaker activity data have pushed equities and USD lower. USD has traded like an asset currency – going up when assets have moved higher and vice versa. However, the US running the largest gross asset position globally suggests that the asset-USD relationship is asymmetric. This week the CPI print will be important.

- Sterling trade slightly up, above to 1.61 level after comments on Friday from Bank of England chief economist Andrew Haldane that said markets might be right to bet that UK rates will be hiked sometime in the middle of next year.

- Nearly half of Japanese firms think the government should start defending the yen at this month's dollar high of 110, a Reuters survey shows, underscoring the threat that rising fuel and other import costs pose to a fragile economy. The survey, conducted from Sept. 30 to Oct. 14, found 45 percent of companies want the government to start talking up the yen or defend it with market intervention at around 110 to the dollar. That suggests that this level could become a key point at which corporate pressure on the government to do something about yen weakness intensifies.

- The Bank of Canada is already seriously disinclined toward raising interest rates over the next year. Now it has all the reasons in the world not to. As the central bank prepares to deliver its next rate decision and quarterly Monetary Policy Report on Wednesday, its staff writers have no doubt been working overtime just to keep the documents up to date with the break-neck flow of economic and market worries this month. But while it might have made writing the policy documents harder, the turmoil has probably made the bank’s communications job easier. Expect the bank to hold its policy rate steady at 1 per cent.

- Moody's downgrades Russia's Ratings to Baa2 on Friday, outlook negative.

- Watch today: German producer prices, Italian industry, US yields.

Have a nice Week !