EUR/USD above $1.3100 for First Time since May 4th

October 17, 2012

The dollar has lost 0.4% against the euro and Australian dollar, 0.3% relative to the Swiss franc and kiwi, 0.2% versus the yen and sterling, and 0.1% vis-a-vis the yuan.  The loonie is steady.

After an extensive review, Moody’s did not downgrade Spain’s sovereign debt rating, which remains investment grade at Baa3.  Markets had been braced for a likely downgrade to junk status.

Share prices climbed 1.1% in Spain and are 0.3% higher in Italy.  The German Dax is unchanged, and the Paris Cac and British Ftse have edged up just 0.1%.  Chinese stocks also firmed 0.1%.  Japan’s Nikkei jumped 1.2%, however, and stocks advanced by 1.0% in Hong Kong, 0.8% in Australia, and 0.7% in the Philippines and South Korea. 

The yields on ten-year German bunds and British gilts are up by five and four basis points, and the 10-year JGB edged a basis point higher.

Gold and oil prices have firmed 0.3% to $1751.70 per ounce and 0.1% to $92.17 per barrel.

In the second U.S. presidential debate, Obama did better but Romney did not do worse.  China bashing remains one of the five cornerstones of Romney’s plan to create 12 million jobs over the next four years.  He reiterated his promise to declare China a currency manipulator on his first day in office.  That would free him to impose tariffs on China with much greater ease.

Japan’s cabinet held an unscheduled meeting to start considering a fresh fiscal stimulus.

British labor statistics are better than expected.  The claimant count of unemployment fell 4.0K in September on top of declines totaling 27.8K in July-August.  The ILO jobless rate in June-August was 7.9%, down from 8.1% in March-May and 8.3% in December-February.  Wage pressures remain tame.  Average earnings in the three months to August rose on-year by 1.7% for total pay and 2.0% for pay excluding bonuses.

The Bank of Thailand is the latest central bank to cut its main interest rate.  By a 5-2 vote, such was reduced to 2.75% from 3.0%.  This cut breaks a streak of five consecutive meetings of the bank’s Monetary Policy Committee without a rate change.  This is the third cut of a cycle that previously saw 25-bp reductions in November 2011 and January 2012.  Nine increases implemented between July 2010 and August 2011 totaled 225 basis points, and four cuts from December 2008 to August 2009 had slashed the rate from 3.75% to 1.25%.

Analysts were surprised to learn of a drop in non-oil Singaporean exports in September.

Australia’s index of leading economic indicators rose 0.5% in August after a 0.3% increase in July.  The index of coincident indicators edged 0.2% higher.

Construction output in the euro area rose 0.7% in August, the most since March, but posted a 5.5% decline from a year earlier.  Such had dipped 0.1% between 1Q12 and 2Q12 and fallen by 5.7% between the second quarter of 2011 and the second quarter of 2012.

The Swiss ZEW expectations index, a gauge of investor sentiment toward that economy, recovered six points to a reading of minus 28.9 in October.

Icelandic consumer price inflation accelerated to a 12-month pace of 5.3% in September from 4.5% in August.

Minutes from this month’s Bank of England policy meeting confirmed an as-expected 9-0 vote to leave the current GBP 375 billion asset purchase program’s size unchanged, since that level would not be attained for another month.  However, doubts about action to be taken in November were raised because some members felt more quantitative easing might not be effective.

U.S. housing starts and building permits will be released today.  Chinese retail sales, industrial production, GDP, and fixed asset investment arrive Thursday.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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