EURO
The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4705 level and was capped around the $1.4855 level. The common currency’s month-ending sell-off coincided with a sharp pullback in U.S. equities prices, evidencing a further reduction in risk appetite. Many data were released in the U.S. today. First, September personal income came in at 0.0%, down from a revised 0.1% in August, while September personal spending met expectations and fell 0.5%, down from +1.4% in August. The September PCE deflatory was off 0.5% y/y while September core personal consumption expenditures were up 0.1% m/m and 1.3% y/y. Also, the Q3 employment cost index was up 0.4% and the October Chicago Purchasing Manager index climbed to 54.2 from 46.1 in September. Finally, the final October University of Michigan consumer sentiment indicator improved to 70.6 from the prior print of 69.4. Today’s data evidence the fact that economic data in the U.S. continues to be mixed with significant month-on-month variations in many economic data series. Federal Reserve regional bank presidents are locked in a battle with congressional officials to reduce their independence. In eurozone news, European Central Bank official Weber yesterday reported the central bank may reduce its unlimited offerings of twelve-month loans in 2010. On the political front, European Union leaders are still deciding who should be the bloc’s first president with former U.K. Prime Minister Blair’s chances falling. European Commission President Barroso reported “We must continue the implementation of our stimulus measures, maintaining a strong focus on jobs. At the same time we need to prepare exit strategies in a coordinated way.” Weber will meet with new German finance minister Schaeuble next week to discuss the government’s spending plans. Weber this week called for “a quick exit from very expansive fiscal policy.” Data released in the eurozone today saw the September EMU-16 unemployment rate reach 9.7%, its highest level since January 1999. Also, French September producer price inflation was off 0.4% m/m and 7.5% y/y. Also, EMU-16 consumer prices were off 0.1% y/y in October. Euro bids are cited around the US$ 1.4445 level.
JPY / CNY
The yen appreciated sharply vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.90 level and was capped around the ¥91.55 level. Yen bulls marched strongly on most of the yen crosses as a sharp month-end downturn in U.S. equities prices led to pullback in risk demand. Many data were released in Japan overnight. First, it was reported that September household spending climbed 2.6% m/m and fell 1.0% y/y. Second, October PMI manufacturing came off for the first time in nine months, declining to 54.3 from September’s three-year high of 54.5. Third, the September jobless rate fell to 5.3%, a pullback from the recent multi-year high. Fourth, the core consumer price index printed at -2.3%, the latest indication of deflationary pressures in the Japanese economy. Fifth, September construction orders were off 14.0% y/y to ¥1.486 trillion. Sixth, September housing starts were off 37.0% y/y. As expected, Bank of Japan reported it will stop purchasing corporate debt at the end of 2009, a move designed to phase out one of the emergency measures it adopted as part of its quantitative easing policies. The central bank also indicated it will only renew one additional emergency program one final time through 31 March. Additionally, the central bank now expects deflation will continue for a third year with core consumer prices expected to decline 1.5% in the fiscal year ending March 2010 and the 0.8% in the fiscal year ending March 2011. Prime Minister Hatoyama reported he “cannot be optimistic” about the Japanese economy despite some signs it is “starting to improve.” It is clear the BoJ and government remain publicly at odds over the status of the economy. The Nikkei 225 stock index climbed 1.45% to close at ¥10,034.74. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥132.30 level and was capped around the ¥135.90 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥147.65 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.65 level. In Chinese news, the U.S. dollar weakened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8210 in the over-the-counter market, down from CNY 6.8215. People’s Bank of China Governor Zhou reported creating a larger international role for the yuan will be the result of a “rather long and gradual process.” Zhou also said the policy to keep the yuan “little changed” is not a conflict with the government’s plan of “currency reform” and cited the Asian financial crisis as one reason to “avoid competitive devaluations with neighbouring countries.” PBoC also reported producer prices bottomed in the third quarter, loan demand is being sustained, inflation expectations are strengthening, the CPI is expected to bottom and improve at the end of the year, third quarter business confidence improved, and fiscal year gross domestic product will be over 8%.
