EZ PMI Services data better
UK PMI at 22 month high
CAD BOC rate decision on tap
USD ISM Services key release
December hike or bust? Yen posted the best performance of the night rising to a 17 week high against the greenback on the back of hawkish comments by BOJ policy member Atsushi Mizuno. Mr. Mizuno stated that soft Japanese consumer spending would not dissuade the central bank from raising rates. His comments spurred speculation that Japanese monetary authorities may act sooner than the market thought raising rates in December even without the corroborating evidence from the consumer sector. Mr. Mizuno expressed full confidence that wages and spending will begin to catch up with the overall growth of the economy and stressed the need for the bank to focus on the long term trend of growth.
Meanwhile Governor Fukui noted that Prime Minister Abe did not make any specific requests about interest rates during their meeting earlier in the day. Traders interpreted Mr. Abes silence to imply consent allowing BOJ to pursue monetary policy free of political interference. In short, the news of the day radically altered markets perception of the likelihood of a December rate hike by the BoJ and put a solid bid underneath the yen all night long. The unit gained across the board picking up nearly 200 points against the pound and falling through the 153.00 level against the euro.
Across the pond both the euro and pound meandered aimlessly, first coming under a spell of profit taking, but then strengthening in early London hours as economic data proved supportive to both currencies. In EZ the Services PMI printed better than expected at 57.6 versus 56.6 forecast. Although French readings slipped a bit the numbers were up across the board showing solid expansion. In UK the PMI Services also beat projections printing at a 22 month high of 59.8. Both EZ and UK, however, continue to demonstrate troubling slowdowns in retail spending. The BRC Monitor registered a gain of only 0.5% on a month over month basis while EZ Retail Sales grew a meager 0.3% with the month prior revised downward to -0.6%. Nevertheless the bulls in both currencies claim that demand will follow growth higher. If todays US ISM numbers disappoint like most of recent US data, euro and cable bulls wont need further reason to take both currencies higher.
