USDJPY Sails Above 80
USDJPY stayed above the 80.0 level during New York hours on Thursday as data in the US continued to be positive. Durable goods orders bounced back in September, growing by 9.9% m/m (consensus: 7.5%), after a 13.1% m/m drop in August. Jobless claims fell back to 369k last week (consensus: 370k) after rising to 392k in the week earlier. Though pending home sales grew at a weaker pace (0.3% m/m) than expected (2.5%) in September, our economists note that details are better as the weakness was mostly from one region. Reuters reported that the BoJ could increase the size of its Asset Purchase Programme by more than JPY10 tr, further supporting USDJPY. Our economists expect the APP to be expanded by JPY10 tr, which could disappoint the markets as most of it is already priced in. As such, we will be wary of further chasing the upside in USDJPY in the days leading to the BoJ meeting on October 30. Ahead today, Japanese inflation report for September is due. UBS expects nationwide core CPI to fall by 0.2% y/y. UK Q3 GDP came in well above consensus at 1.0% q/q (consensus: 0.6%) boosting GBPUSD by about 70 pips. Our UK economics team reacted to the GDP report by abandoning their call for an expansion of Gilt purchases at the forthcoming BoE meeting on November 8. They see this as a pause though rather than a full-stop to the QE program – a pattern that is not without precedent (either in the UK or the US). After all, the Olympics was a one-off event which was key reason for the positive data surprise. EURSEK nudged higher too after the Riksbank kept policy settings unchanged while lowering the repo rate path and cutting the 2013 CPI estimate to 0.7% from 1.3%. NZD temporarily weakened in the late hours of the New York session following comments from RBNZ Governor Wheeler who noted that the Reserve Bank would like to see a lower exchange rate “provided it can be achieved without damaging price and financial stability”. Wheeler noted that currency intervention is unlikely to have a sustainable effect on NZD, although it can have an impact in the short term. Ahead today, key data releases including September CPI in Japan, October KOF indicator in Switzerland and Q3 GDP in the US will be in focus.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank