USD And JPY Lose
Risk sentiment improved overnight as JPY lost across the board. US jobless claims unexpectedly fell by 30k last week and the four-week average fell to 364k from 375k the prior week. Trade deficit widened slightly in August to USD44.2 bn. Trade deficit in Canada narrowed to CAD1.3 bn (consensus: CAD1.9bn). USDCAD fell by about 30 pips on Thursday. USDJPY also pushed higher on announcement of a potential M&A deal (between Sprint and Softbank). Though the Spanish bond markets opened lower following the S&P’s downgrade yesterday, they bounced back after an improvement in overall risk appetite and hopes of a Spanish request for EU aid – Spanish 2y yields lost about 5bp on Thursday. However, Spanish Deputy Prime Minister Saenz reiterated that Spain needs to know the “extent” of any possible aid before making the request. EURSEK pushed higher after soft Swedish CPI numbers in September (the headline rate expanding by just 0.4% y/y) and comments from the Finance Minster Anders Borg that the krona is too strong versus the euro. A Greek government official noted that talks with the Troika progressed on Thursday and hoped that an agreement can be reached on most issues by October 18. In the US, FOMC members Stein, Raskin, Plosser and Bullard were on wires on Thursday. In his first keynote speech since becoming a Fed Governor in May, Stein supported the QE3 programme noting that the benefits of MBS purchases outweigh the risks involved. Bullard predicted that unemployment will continue to fall. Ahead today, September money stock numbers (M2 and M3) are due in Japan and the University of Michigan confidence index for October and monthly budget statement for September are due in the US.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank