Sentiment remains choppy as the end of the year and the fiscal cliff looms. House Speaker Boehner is expected to hold a press briefing at 1315ET today which may provide market moving headlines. Yesterday he said that Obama needs to “get serious soon” while Obama told republicans to they need to “make some adjustments”. The dollar is trading mostly on the back foot as sentiment advances following a stronger than expected revision to US 3Q GDP. The buck is stronger against the AUD, which is underperforming after Australian Treasurer Swan indicated that the country is unlikely to have a budget surplus in 2012-13. The euro remains firm against most of the majors despite continued weakness in the region’s economic data.
German producer prices fell by -0.1% m/m (prior 0.0) and slowed to +1.4% on a yearly basis (prior +1.5%). Import prices were unchanged from the prior month and grew 1.1% y/y (prior 1.5%). In Italy, retails sales disappointed, unexpectedly falling by -1.0% m/m and -3.8% y/y. Retail sales in the UK were soft with prints of 0.1% m/m (cons. 0.4%) and 2.0% y/y (cons. 2.2%). EUR/USD is currently around the 1.3250 level after being rejected ahead of the 1.33 figure as the current rally looks like it may be running out of steam for now (see chart below).
Overnight, the Bank of Japan announced an expansion to its Asset Purchase Program (APP) by 10 trillion yen (5T in bills, 5T in bonds). The decision to expand asset purchases was unanimous and brought the total size of the program to about ¥101T. The Bank kept the rate of monthly purchases at ¥1.8T. The BoJ indicated that it will examine its inflation goal at the next policy meeting amid increasing political pressure to act more aggressively with calls from PM elect Abe to raise the inflation target. As we noted previously, an incremental increase to the BoJ’s APP was uninspiring to further weaken the currency and USD/JPY is lower today. US treasury yields are lower which are weighing on USD/JPY. The technical picture remains constructive while the pair trades above the 82.80 level which is the convergence of the 21-day SMA and 23.6% Fibonacci retracement of the rally from September lows to recent highs.
Swiss trade surplus supports franc
Switzerland’s trade balance unexpectedly grew to a surplus of 2.95B from the prior 2.73B (expectations were for a narrowing surplus to 2.23B). This was a result of a 6.0% increase in exports which was more than the 0.2% increase in imports. USD/CHF fell to new 7-month lows on the back of a stronger franc.