The U.S. dollar gained broad support after a strong release of the Fed Bank of New York's manufacturing index. The Empire State Manufacturing Survey for November rose to 26.7 from 22.9 seen last month. Also boosting the dollar was investors who started squaring positions ahead of the release of minutes from the Federal Reserve. There is growing speculation that the Fed’s tone today could be slightly hawkish given recent talk from Fed officials. St Louis President William Poole stated yesterday that the Fed. could go either way next year possibly instituting a rate hike or a rate cut. The market will continue to await this afternoon’s Fed. minute’s release and look towards tomorrow’s consumer price data for further direction of the dollar.
The euro was down 0.1 percent against the dollar, while the currency lifted against the yen, just below last week's record peak. With weak GDP data releasing yesterday, look for Europe’s single currency to remain range bound. Expectations, however, remain for interest rates out of the Euro zone to still rise to 3.5 percent next month.
The Japanese yen fell almost half a percent this morning as the market awaits Bank of Japan Governor Toshihiko Fukui’s news conference on the back of the central bank’s two-day policy meeting which wraps up tomorrow. The BOJ is expected to keep rates at 0.25 percent at the meeting, but many analysts are looking for a potential rate hike by December of January. Also pressuring the yen was news that broke of an 8.1 quake that was recorded in the Kurile Islands, issuing a tsunami warning to northern Japan and Russia.
Sterling fell against the dollar and Euro after the Bank of England indicated that rates may not need to rise quite as high as markets were anticipating. The B of E released its quarterly inflation report after raising its overnight rates to 5.0 percent, sighting that CPI inflation may come in short of the 2-percent target, with overall inflation peaking to around 2.7 percent at the end of this year. Also pressuring the pound was the release of a weaker than expected employment report. Average earnings in Britain only rose by 3.9 percent the last three months, its weakest rate since last January, while the jobless rate rose to 5.6 percent its highest level in more than six years.
The Swiss franc weakened to a 6-1/2 year low against the Euro Swiss franc surpassing a key technical level. The critical level reached today may even prompt a rate move from the Swiss National Bank. Also placing pressure on the Switzerland’s currency was talk from SNB chairman, Jean-Pierre Roth, where he stated that said the franc looked less attractive as a safe-haven currency.
The Canadian dollar fell to 3-1/2-month lows against the greenback after data sighted a drop in Canadian factory orders in September. Look for the loonie to remain under pressure ahead of tomorrow’s release of foreign securities data.
The Australian dollar held onto recent ranges against the dollar even after the release of weak domestic third-quarter wage data prompted expectations that the Australian central bank would hold rates steady. Wage costs rose a smaller-than-expected 0.8 percent with annual growth up only 3.8 percent. Look for the Aussie to remain range bound with the market’s focus turning towards steady rates.
The New Zealand dollar also held onto recent ranges after the release of a stronger-than-expected retail sales report. September monthly sales rose 1.2 percent against a forecast of no change, while core sales, excluding vehicle sales and services, rose 2.2 percent. The release prompted analyst’s expectations that the Reserve Bank of New Zealand will sustain its tightening bias.
Indicative Rates:
