JPY IP down from record high
French manufacturing strong on exports
GBP Hot M4 growth
US PCE on tap
News that the Central Bank of the United Arab Emirates was considering diversifying their mounting reserves out of the greenback and into euro, pound, and yen left the currencies to consolidate Fridays gains throughout Asian and early European trading. The IMF also eported that the UAEs central bank FX reserves are set to jump 17.5% this year to $24.8B, solidifying the impact of a pullback from the greenback. The news highlights a trend weve seen over the past few years, and even in the past month with Russia and Switzerland, but most notably at times of dollar weakness. Nevertheless, EUR/USD firmed above 1.2700 on little economic data, GBP/USD edged higher towards 1.9000 on hot M4 figures, while the low-yielding yen lost steam against the greenback with USD/JPY trading back around 117.50. The lack of reaction from the majors on the news means that we could see more significant action later in the day.
In the UK, M4 money supply was revised higher in September to 1.7% from 1.0%, bringing the annual rate to a whopping 16-year high of 14.5%. With money supply being an indicator of price pressures, todays results are likely to add to concerns by hawkish members of the Bank of England. Meanwhile, mortgage approvals surged to a two-year high of 126K, signaling that the August rate hike had little impact on the seemingly endless demand for housing. The BOE MPC already had two votes for a rate increase at the last meeting, and now that GDP has surprised to the upside and CPI has held above the central banks 2.0% target at 2.4%, other members may strike a more hawkish note in November with a hike to 5.00%.
Today, the Fed will be looking at core PCE, meaning traders will be as well. The annual measure is expected to slow to 2.4%, which should provide some comfort for the US central bankers that inflation is in the process of easing back. Meanwhile, personal income and personal spending are set to nudge higher in September, but following Fridays dismal GDP report at 1.6% and rumors that it could be revised even lower, it may take major upside surprises today to get dollar bulls back in the market.
