USDJPY Starts To Tire
Risk appetite weakened in Asia overnight after a soft GDP report from Singapore and reports of escalating tensions in the Middle East. But the US fiscal cliff continues to dominate the horizon – China’s Vice Finance Minister served reminder of the potential global consequences, noting that if the cliff hits as planned it could subtract 1.2% from Chinese GDP in 2013. Fed Chair Bernanke sounded downbeat on the state of the US housing market overnight. He said that a weak housing market represents a ‘powerful headwind to recovery’, and that a revival of the sector faces significant obstacles. He offered little in the way of fresh guidance, but will have another opportunity to do so when he appears at the Economic Club in New York on Nov 20. USDJPY meanwhile topped out at 81.46 following a strong rally for much of the past 48 hours in anticipation of even more accommodative BoJ policy in future. Political rhetoric continued to flow from Japan’s opposition LDP party, and vague plans were unveiled to set up a public-private company for the purchase of overseas bonds. But USDJPY did not react – a sign perhaps that investors are becoming a little more skeptical about grandiose political plans that may take months or even years to come to fruition. US jobless claims rose sharply to 439k (cons. 375k), although Hurricane Sandy was largely to blame. The focus now will be on how quickly claims decline again and resume their downward trend. Today, US industrial production dominates what would otherwise be a sparse data calendar.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank