Payrolls Day
USD and JPY lost across the board on Thursday as risk appetite strengthened. EURUSD rallied steadily during the New York session to break above the 1.30 level after a successful Spanish bond auction, where the government sold EUR3.99 bn bonds, close to the target maximum. The ECB and the BoE kept their benchmark rates unchanged as expected. During the press conference, ECB President Draghi noted that a rate cut was not even discussed on Thursday’s policy meeting. Draghi refused to speculate on when the OMT programme will be activated, noting that the programme is “ready” and it is up to the governments now to request for it. He also noted that the OMT programme is for only countries under the EFSF/ESM programme and with “full access” to markets – therefore not applicable to Portugal. EUR bulls remained undeterred by comments from Spanish Economy minister Guindos that “Spain does not need a bailout at all” and news reports suggesting that the EU expressed concerns on the viability of Spain’s 2013 budget plan. Greek Prime Minister Samaras said he is “optimistic” that an agreement with the Troika committee could be reached before the EU summit on October 18. The minutes of September FOMC meeting offered little in terms of new information. Ahead today, the BoJ will convene the first of its two meetings in October. It is unlikely that the central bank announces any new policy initiatives in this meeting and our economists expect the CPI and GDP forecasts to be revised in the next meeting on October 30. Market focus today will be on the employment report in the US. Our economists expect non-farm payrolls to increase only by 85k in September (consensus:115k). A weak report would mean more QE3 and a weaker USD.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank