• USD: Higher, investors are reducing risk exposure & deleveraging as equity markets trade lower
  • JPY: Higher, Japan’s economy is back in deflation, BOJ upgrades its assessment of Japan's economy
  • EUR: Lower, Trichet says too early to say if the crisis is over
  • GBP: Lower, CBI warns on UK public debt, calls on the government to balance the budget by 2016
  • CAD and AUD: AUD & CAD lower, tracking weaker equity and commodity prices, Canada’s Q3 growth slows

Overview

The USD continued to rally into the weekend supported by deleveraging as investors are reducing risk exposure in reaction to a drop in equity and commodity markets. Weaker than expected earnings at Dell, coupled with a statement from ECB President Trichet that it's too early to tell if the financial crisis is over and fresh warnings about UK debt appear to be the catalyst for the latest wave of selling in global equity markets and liquidation of high yield currencies. It's not clear whether this weeks recovery in USD is a reflection of liquidation and booking of profits by investors and funds for year-end or if the USD recovery reflects concern about strength and sustainability of the global recovery. Next week's focus turns to the release of US preliminary Q3 GDP and the FOMC minutes for this month's policy meeting. US Q3 GDP is expected to see a downward revision from the advanced report of a 3.5% rise. The FOMC minutes are expected to confirm that the Fed is not yet ready to signal a timeframe for tightening of monetary policy. The Fed's Plosser says now is not the time for the Fed to begin to hike rates. The FOMC minutes are expected to confirm that he Fed will maintain low yields for an extended period. The question is whether the continuation of low Fed yields will encourage more participation in USD funded carry trades before year end or if Fed policy outlook has been discounted by the sharp rallies in the equity and commodity markets since March of this year. Pimco’s Gross is recommending that investors move to defensive sectors of the economy because of expectation that growth will be sluggish at best.

Today’s US data: 

There were no major US economic reports released in today's trade..

Upcoming US data: 

Next week's US economic calendar includes the November 23rd release of existing home sales for October expected at 5650k compared to 5570K last month. FOMC minutes for the October meeting are also due for release on the 23rd.On November 24th Q3 preliminary GDP will be released expected at 3.3% compared to 3.5% in the advanced report. September Case Shiller house price index and November consumer confidence will also be released on November 24th. The Case Shiller index is expected at -9.9 compared to -11.3 last month and
consumer confidence is expected to improve to 49 from 47.7 in October. On November 25th initial jobless claims for week ending 11/21 will be released expected at 501k compared to 505k last month along with personal income and personal consumption expected at 0.1% and 0.4% respectively. November final University of Michigan sentiment and October new home sales will be released on November 25th as well. Michigan consumer sentiment is expected unchanged at 66 and new home sales are expected at 410k compared to 401k a last month.