NYC Braces For Hurricane Sandy
US Q3 GDP grew by 2.0% against the consensus call for a 1.8% growth. Our economists note that the growth was driven primarily by domestic demand from the household sector. The final estimate of University of Michigan consumer sentiment index edged down to 82.6 in October (earlier estimate: 83.1). USDJPY which gained by almost a big figure early in the week, pared some of its gains away on Friday, as JPY gained across the board. The BoJ policy decision on Tuesday and the US payrolls on Friday will set the next course of price action in USDJPY. We expect the BoJ to increase the size of its Asset Purchase Programme by JPY10 tr for 2013. Though markets have already priced in most of this easing, USDJPY may get additional support form the BoJ’s CPI outlook – where it is likely to cut inflation forecast for 2013 from 0.7% to 0.5% and the outlook for 2014 may be set around 0.5%-0.9%. EURUSD traded in tight ranges on Friday due to limited data. Ahead today, markets will focus on headlines from Spanish Prime Minister Rajoy’s meeting with his Italian counterpart Monti in Madrid. ECB Governing Council member Nowotny said he expects Spain to wait longer before asking for EU aid and Greece to receive the next tranche of EU aid by mid-November. According to a Der Spiegel report, the interim Troika review revealed that Greek government will need two more years to meet the budget deficit targets. It noted that the two year delay will cost about EUR30 bn (according to the ECB‘s estimates). The report added that the long-awaited report would be published on November 12 at the latest. Dutch Finance Minister de Jager reiterated that the Netherlands is opposed to extra aid for Greece. The continued uncertainty on Greece and Spain will weigh on EUR in the near-term. Ahead today, UK M4 money supply and German CPI will be in focus. In the US, federal government offices in the Washington area and NYSE trading floor will be closed on Monday as the east coast braces for Hurricane Sandy.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank