JPY Machine Tool Orders slightly better
GBP UK Retail Sales much better on clothing sales
EUR EZ labor costs at 8 year low
USD Import price index and jobless claims on tap
Another relatively quiet night of trade in FX as traders face only a few more event risks before the end of the year. In UK news continued to impress as Retail Sales surprised to the upside rising 0.3% as gains in clothing sales helped boost overall revenues. Tonights news along with yesterdays surprisingly strong employment figures paint a much healthier picture of the UK economy than market consensus and further increase the possibility of additional rate hikes by the BoE. Despite a slowdown in industrial sector, the UK economy is benefiting from a strong housing market and tremendous growth in the financial sector with London now serving as the capital of global finance as it becomes an intermediary between the petro-dollar flows from Russia and the Gulf to the investment markets all across the world. This dynamic has not only helped the UK economy but has also revived sterlings importance to the composition of Central bank reserves as the unit has become the third most popular reserve currency in the world.
In the meantime, the EUR/USD attempted a comeback in the Asian session, but was stymied as the 1.3250 level. EZ employment costs printed at an 8 year low greatly undermining ECB hawkish arguments on wage inflation. While ECB members continue to point to the fact that inflation risks remain skewed to the topside, if EZ data suddenly begins to falter, the market will begin to question the central banks ability to tighten further and EUR/GBP may way well revisit the 6700 level as interest sate expectations between UK and EZ are readjusted once more.
Finally, the woe-begotten yen continued to suffer in overnight trade hitting yet another high above 155.50 against the euro. Even a long time yen dove like Horoshi Watanabe had to come to its rescue by stating that the Japanese economy is not deteriorating and that yens decline could not be attributed to any weakness in economic performance. Despite his jawboning the currency continued to flounder, but tomorrow Tankan survey does sets up the possibility of a major turn in the pair. If it prints much better than expected, it could spur the BoJ to hike rates on the 18th though almost no one in the market expects them to do so. That of course is when the greatest moves occur in FX and with EUR/JPY in a near parabolic climb the fall could come sooner rather than later on any yen positive piece of news.
