USD has strengthened

Market Movers

• Today’s calendar for economic data releases is relatively thin.

• Main focus will be on US monetary policy as Fed’s Dudley (voter, dovish), Powel (voter, neutral) and Fed Chair Yellen will speak this afternoon (CET). Also in the US, data for housing starts and building permits for September will attract some attention. The rise in building permits in August is expected to be reflected in an increase in starts in September, while permits are expected to fall back slightly. The overall picture is of a housing market continuing to benefit from a favourable mix of low interest rates and positive real income growth. Homebuilding activity is also still below the long-term trend, which points to further improvements in the housing market. Yesterday’s US NAHB housing market index release supports this view.

• Today will also bring current account figures for Switzerland and the euro area.

• We expect the National Bank of Hungary to leave rates unchanged today at 1.35%.

• There are no important data releases in Scandinavia today.

Selected Market News

Commodities markets tumbled on the back of yesterday’s Chinese GDP data revealing the slowest growth since the financial crisis. In particular disappointing industrial production figures suggest a falling Chinese demand, which has contributed in sending not least oil and base metals lower. Adding to the concerns, economists are questioning the accuracy of the headline GDP figure.

In FX markets the USD has strengthened somewhat partly aided by comments from Fed’s Williams that he saw the time to start raising rates ‘in the near future’. In its semi-annual report to Congress the US Treasury dropped previous comments that the Chinese Renminbi is ‘significantly undervalued’.

Otherwise markets are still very much awaiting Thursday’s ECB meeting. We expect the ECB to keep its powder dry at the meeting but to retain a dovish tone and reiterate that it can adjust the size, duration and composition of the QE programme.

In Australia, minutes from the 6 October monetary policy decision confirmed the impression from the initial statement that the bank sees no immediate need to reduce rates further. The minutes re-iterated that future decisions remain data dependent. Our base case remains that Governor Stevens will leave rates unchanged in the next 12M.

In Canada, the Liberal Party is set to win the national election ousting the Conservative Party that has been in power for almost a decade. The CAD has weakened on the prospect.

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