Risk Currencies Steady
JPY fell slightly across the board as risk assets held steady on Monday during the New York session. US retail sales rose by 1.1% m/m in September beating market expectations of a 0.8% rise. Our economists note that the unexpected increase in retail sales “control group” (ex auto, gas, building material) by 0.9% m/m puts upside risk to our Q3 GDP forecast. NY Fed (Empire State) manufacturing survey rose to -6.2 from -10.4 (consensus: -4.0) but the details including new orders and employment remained weak. The impact on USDJPY was fairly muted following the data announcements. FOMC members Bullard, Lacker and Dudley were on wires on Monday. Lacker noted that Q2 weakness in employment was “transitory” and added that the recent job growth has been closer to average during recovery. Bullard estimated the economy to grow by 3.5% in 2013, pushing the unemployment rate down to 7%. Headlines from the Eurozone were limited on Monday. Greek Prime Minister Samaras commented that Greece will soon receive the next bailout tranche. EURUSD traded in tight ranges during New York hours. BoC Governor Carney noted that capital flows into the country have been pushing up CAD and also having a supportive effect on domestic growth by keeping long-term interest rates down. The international securities transactions report for August is due ahead today. The RBA will release the minutes of its October meeting later today. What will be of particular interest is discussion on the extent to which Q3 CPI data will provide ‘scope to ease’ rates again. Our economists expect core inflation (due on October 24) to remain at the bottom of the central bank’s 2-3% target range and so allow further interest rate cuts of 25bp on November 6. Also on tap today are the CPI data in the UK, ZEW survey in Germany and CPI and industrial production numbers in the US.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank