• USD: Higher, core PPI falls more than expected, industrial production & capacity use rise less than expected
  • JPY: Lower, tertiary index activity drops more than expected, concern about deflationary pressures
  • EUR: Lower, trade surplus widens as exports rise, pressured by a drop in risk appetite
  • GBP: Lower, consumer inflation rises more than expected, tracking risk appetite
  • CAD and AUD: AUD & CAD lower, RBA may pass on a December rate hike, crude, gold stocks lower

Overview

USD traded higher Tuesday as risk appetite takes a sudden turn down as equity markets decline in reaction to a warning from the IMF that the global recovery will be sluggish. The USD may be also benefiting from comments from Fed Chairman Bernanke that Fed would help ensure that the USD is strong and a source of global financial stability and comments from ECB President Trichet calling on the US to confirm that strong USD is in the best interest of the US. Bernanke also said that the Fed is watching USD price movements closely. Commodity currencies were pressured by today's setback in risk appetite and weaker crude and the price of gold. AUD traded sharply lower in reaction to the release of the RBA minutes which seemed to suggest that the RBA may pass on a December rate hike. Global economic data was mixed with the EU trade balance posting a modest improvement and UK consumer inflation rising more than expected. The rise in UK consumer inflation helped limit GBP downside. USD was also supported by report that Russian officials said they do not plan to further diversify reserves. USD was also supported by report that net capital inflows to the US surged by 133.5bln in September as investors grew more confident in the US recovery. Today's US economic data was mixed with PPI rising less than expected and core PPI posting an unexpected drop, industrial production and capacity utilization also rose less than expected. Today's drop in US core PPI may heighten fears of deflationary pressures and encourage the Fed to maintain ultra accommodative monetary policy. Despite today's USD rebound the underlying negative USD theme will likely to continue as investors track low US yields and risk sentiment.
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Today’s US data: 

October PPI rose by 0.3%, a 0.4% rise was expected. Core PPI declined by 0.6%, the core PPI was expected to rise by 0.1%. October industrial production rose by just 0.1%, a 0.4% rise was expected. October capacity utilization rose to 70.7, a reading of 70.8 was expected..

Upcoming US data: 

On November 18th October CPI will be released expected unchanged at 0.2% along with October housing starts and building permits. The housing starts are expected to rise to 600k from 590k last month and building permits are expected at 580k compared to 573k last month. On November 19th initial jobless claims for week ending the 11/14 will be released expected at 497k Compared to 502K last month. October leading indicators and November Philly Fed will also be released on November 19th. Leading indicators are expected to rise by 0.4% compared to 1% last month and the Philly Fed is expected at 12.5 compared to 1.5 last month.

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