USDJPY Pushes Higher
USDJPY continued to push higher overnight, fuelled by further positive data releases in the US yesterday. Housing starts jumped by 15% to 872k (consensus: 770k), highest level since July 2008, and building permits were up by 11.6% to 894k (consensus: 810k) in September. The clear momentum in the data releases has fuelled a resurgence in risk appetite, though we would favour playing this through a higher USDJPY, given the risk of further substantial easing at the October 30 BoJ meeting. EURSEK came under pressure in the European session, as a paper released by the Riksbank Governor highlighted the risks associated with low rates in Sweden. While this is not exactly new information, expectations for further Riksbank cuts in the upcoming meeting are starting to be scaled back so we see some scope for a correction in NOKSEK from these levels. Credit data in Span saw bad loans rising to EUR 178.6 bn in August, a slight rise from the July figures, though the euro was largely unmoved on this. Cable pushed higher after UK retail sales rose +0.6%m/m vs +0.3% cons. During the Asia session, Chinese figures came in line with expectations at 7.4%y/y, and other figures such as industrial production and the crucial fixed asset investment component, in addition to retail sales all surprised slightly to the upside. Although the Eurozone is managing to move ahead without much incident, we believe the material change in data over the last month has been the critical catalyst for an improvement in market sentiment and regardless of the structural faults, this move should have legs as investors are still under pressure to perform. Besides the EU summit, jobless claims in the US are due today.
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UBS Investment Bank