The USD continues to struggle to regain momentum

Good Morning,

- Euro trade on defensive mode, after ECB bond buying report.

- Asian shares rose on Wednesday supported from results from two U.S. technology giants and hopes of fresh stimulus from the ECB offset concerns about the outlook for the global economy.

- The euro finds some support after Reuters report that the European Central Bank is considering buying corporate bonds, while recovery in risk appetite underpinned the dollar against the yen. The dollar index last trade at 85.401, extending its rebound from a three-week low of 84.472 hit a week ago.

- Treasuries fell yesterday after a report showed existing home sales rose to their highest level in a year, indicating the U.S. economy is still improving amid slowing global growth. The benchmark 10-year note yield increased as prospects for additional stimulus from the European Central Bank boosted equities and curbed demand for the safest assets. A government report today is forecast to show that U.S. inflation declined for a third consecutive month in September.

- Futures on federal funds indicate 65 percent likelihood the FED will raise interest rates by its December 2015 meeting.

- The ECB bought Italian covered bonds as it returned to the market for a second day, according to people familiar with the matter.

- BNP Paribas on EUR/USD: The USD continues to struggle to regain momentum, notes BNP Paribas. "US front-end yields have remained stuck near the very low levels reached during the peak of risk aversion last week despite an upside surprise on US September existing home sales, depriving the USD of a catalyst for recovery," BNPP adds. How to position? 1- "We remain constructive on the USD but accept that it may take time to repair the damage of the past two weeks and would be careful of trading the USD from the long side just now," BNPP advises. 2- "We remain more constructive on short EUR-cross positions, with Tuesday’s Reuters report suggesting the ECB could be moving towards broadening its asset purchase program, notwithstanding ECB denials, likely to encourage use of the EUR as a funder as the risk environment stabilizes," BNPP adds.

- The European Commission will on Wednesday tell five euro zone countries, including France and Italy, that their budget plans risk breaching EU budget rules, say three EU officials briefed on the decision. The other 3 are Austria, Slovenia and Malta. Yesterday, Reuters estimated that Italy’s budget will be outright rejected. Today is the deadline to notify government of potential non-compliance and the EC would have until the end of the month to formally reject the budgets, which could re-invigorate anti-euro zone sentiment in those countries.

- SNB’s Zurbruegg: Current interst rates are appropriate from a price stability point of view. There’s been talk about negative deposit rates but it looks like there’s no appetite for a move unless the 1.20 floor in EUR/CHF is seriously challenged. The franc is highly valued. Will defend cap with utmost determination. Prepared to take further measures immediately.

- Japanese trade data released early Wednesday show exports rose 6.9 percent in September from a year earlier, the fastest pace in seven months, in a tentative sign that external demand is starting to pick up.

- Australia Consumer prices edged 0.5 per cent higher in the September quarter. The CPI reading for the three months to the end of September leaves the 12-month inflation rate at 2.3 per cent.

- Watch today: BoE minutes, US mortgages, US CPI.

Have a nice Day !