Markets took a rest on Wednesday and the forex market was little changed. The euro and Australian dollar were being modestly higher while the U.S. dollar and Canadian dollar lagged as oil slumped.
News stream was soft. European leaders continue to try to sort out a backstop pertaining to Ireland. The Irish government asserts it does not require or want to be bailed out therefore the money will likely be funneled straight to embattled Irish banks. Rising expectations that something will get done has reinforced the euro.
In the United States, 2 economic info factors aided to help the Fed’s introduction of QE2. The consumer price index was flat for the third sequential month, excluding food and energy. Economists were looking for a reading of 0.1%. The lack of price demands suggest the Fed was accurate to head off a danger of deflation.
Similarly, Housing data in the United States proceeds to indicate no signal of a bottom. Housing starts fell to an annual rate of 519K in October – the lowest since April 2009. Economists were expecting a reading of 598K and the September data was basically adjusted to 588K from 610K. The pipeline looks likewise bare with building permits growing merely 0.5% in comparison to the +3.9% predicted. The market has been conditioned to expect to have absolutely no beneficial news from the housing industry so the reaction was just about a ten pip fall in USD/JPY.
Fed policymakers communicating over the past day have presented the idea of further more quantitative easing, on top of the $600 billion introduced on Nov. 3. Chicago Fed President Charles Evans (non voter) stated the $600 billion plan is a “good place to start” whilst Boston Fed President Eric Rosengren (voter) claimed the Fed might need to look at doing more if the economic climate weakens. The remarks are supporting risk appetite and stalling the U.S. dollar rally.
The best performer (narrowly) on Wednesday is the pound sterling. This comes following claims for jobless benefits fell 3.7K in October compared to the +6.0K expected. The Bank of England’s minutes demonstrated a similar three-way split as last month with Sentance calling for rate hikes and Posen calling for more QE.
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