Forex Market Updates & Commentary

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• Ivey PMI comes in much weaker. Give USDCAD a boost
• Canada Ivey Purchasing Manager Down
• ECBs Trichet gives his views and the lower dollar continue
• ECB’s Trichet on the Wires:
• Bernanke’s Washington Post Op-ed
• Productivity up but what good is it? Initial Claims disappoint too
• Jobless Claims Rise Again
• BOE keeps their rate and QE unchanged
• The FOMC fireworks are over. Leads to weak dollar
• US Nonfarm Productivity & Jobless Claims data at 8:30AM
• Eurozone PPI inline at 0.3%
• Eurozone Final Services PMI
• Swiss CPI
• Euro continues to show strength
• UK Halifax HPI stronger than expected

Ivey PMI comes in much weaker. Give USDCAD a boost Posted: 04 Nov 2010 07:12 AM PDT

Canada Ivey Purchasing Manager Down Posted: 04 Nov 2010 07:04 AM PDT

ECBs Trichet gives his views and the lower dollar continue Posted: 04 Nov 2010 06:53 AM PDT

ECB’s Trichet on the Wires: Posted: 04 Nov 2010 06:40 AM PDT ECB Interest rates are appropriate Economic uncertainty still prevailing Inflation pressures remain contained over medium term Inflation expectations remain firmly anchored Firm anchoring of inflation expectations of ‘essense’ ECB policy will be adjusted as appropriate Government council will monitor all  developments closely Inflation will remain at current levels Risks to inflation outlook titled to upside Domestic price pressures remain contained Credit data suggest turning point earlier this year Challenge remains to expand bank credit Its essential that nations pursue credible plans Countries must implement consolidation plans Any positive fiscal development must be exploited Major reforms needed in high-deficit countries. Doesn’t think U.S. is pursuing weak dollar policy

Bernanke’s Washington Post Op-ed Posted: 04 Nov 2010 05:47 AM PDT http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html FOMC Chairman’s Op-Ed in the Washington Post (click on the link above) explains his/the Feds reasoning for the increased QE conducted yesterday.  As discussed during our webinar on Tuesday, the Fed remains concerned about the low inflation/high employment that has persisted since reaching the abyss of the recession. Typically, unemployment moves lower, faster, after a steep recession and this in turn supports prices as businesses look to recoup from the recesssion.  That has not occurred.  PCE fell to 1.2% YoY this week with MoM showing no change.  Next month, a 0.3% gain from a year ago, drops out of the calculation which should lower the PCE below 1% YoY.  Unemployment at 9.6% from 10.1% is not improvement. The resulting effect from “this times” dead cat bounce, is lower incomes and expectation for lower prices (i.e. deflation or disinflation).  The Feds hinting of additional QE over the last month or so, has led to lower mortgage rates and could be spurring on some growth in that sector as a result.  However, judging from the change in interest rates on the longer end post the announcement yesterday, the effects on mortgage rates might have already seen the good news.  Today we saw Unit Labor Costs declining for the 3Q which is not good news for future spending. Workers need more money to spend more money. However, that is also now in the rear view mirror. What we and the Fed will be looking at is the road ahead. Will the stimulus from the increased purchases find its way into the hands of businesses and ultimately in the consumers pocketbooks.  Will the resulting lower dollar lead to increased investment from abroad - even in housing?  Will exports of services from the likes of IBM, Oracle, Microsoft, lead to a more balanced trade picture and higher growth.  That is the road we will be looking at ahead. For those worried about too much money being printed, it may be, but Bernanke feels he has no choice. However, be aware that if the Fed sees an increase in lending activity. If they start to see an increase in the velocity of money. If they see deleveraging slow. iIf they see job gains. They will tighten and take back fast.  When will that happen?  Time will tell, but indications remain that it will not be soon.

Productivity up but what good is it? Initial Claims disappoint too Posted: 04 Nov 2010 05:34 AM PDT Non Farm Productivity was stronger at +1.9% for the quarter erasing the -1.8% decline last month but what good is it when Unit Labor Costs FELL by -.1%.  Workers are working harder for less pay.  Less pay means less spending.  Meanwhile the US Initial Claims gains from last week were erased today.  The 457 K number is a disappointment.  It may be influenced by Columbus Day but…Lower dollar

Jobless Claims Rise Again Posted: 04 Nov 2010 05:31 AM PDT Nonfarm Productivity:        Survey: 1.0%         Actual:  1.9%        Prior:  -1.8%        Jobless Claims:     Survey: 442K    Actual:  457K   Prior: 434K    Revised: 437K    Continuing Claims:      Survey: 4378K    Actual: 4340K    Prior: 4356K    Revised: 4382K Unit Labor Costs:           Survey: 0.6%         Actual:  -.1%         Prior:  1.1%        Revised: 1.3%

BOE keeps their rate and QE unchanged Posted: 04 Nov 2010 05:02 AM PDT Bank of England maintains banchmark interest rate at 0.5%. They also kept the Asset Purchase Program steady at 200 billion pounds. This is as expected. The BOE has to struggle with better data of late but high inflation (above 3% upper target). The other wild card is the effects of the austerity program in the future with higher VAT and less government fiscal stimulus. This may lead to an increase in QE in the 1st quarter of 2011. But until then, the BOE will be happy to see if the inflation can find a way to dip down. The GBPUSD is higher and that helps lower import inflation, but with the GBP weaker vs the EURGBP and GBPJPY (at least from a broader picture), the question is could the currency use some more strength. EURGBP is higher over the last few months, and GBPJPY rallying off the lows but still near the lows longer term, the currency may need a little more strength against those currencies.

The FOMC fireworks are over. Leads to weak dollar Posted: 04 Nov 2010 04:52 AM PDT With the FOMC over, the dollar has voted to the downside. For now at least. In today’s NY Opening Forex Commentary, I look at the EURUSD, GBPUSD, USDJPY, USDCHF, EURJPY, USDCAD and the AUDUSD. Free forex webinar today at 4PM ET. To register go to http://forex.fxdd.com

US Nonfarm Productivity & Jobless Claims data at 8:30AM Posted: 04 Nov 2010 04:31 AM PDT

Eurozone PPI inline at 0.3% Posted: 04 Nov 2010 03:05 AM PDT Eurozone PPI m/m came in at 0.3% inline as expected and stronger than the 0.1% prior reading. Eur/Usd currently trades at 1.4255.

Eurozone Final Services PMI Posted: 04 Nov 2010 02:02 AM PDT Eurozone Final Services PMI was revised to 53.3 from 53.2. Eur/Usd continues to look bid currently trading at 1.4210.

Swiss CPI Posted: 04 Nov 2010 01:29 AM PDT Swiss CPI came in at 0.5%, weaker than the 0.7% expected. This number did not create much of a market effect as the strength of the Euro and the possibility of Jpy intervention remain at the forefront.

Euro continues to show strength Posted: 04 Nov 2010 01:25 AM PDT Eur/Usd continues its grind higher, as the pair has jsut made a fresh high of 1.4180. It has not gained a sufficient stronghold above 1.4170, which was an earlier high made after yesterdays FOMC meeting. If the pair does not break above a pullback to 1.4140-45 is likely. A break above should bring us to 1.4210-15 , where there may be light resistance.

UK Halifax HPI stronger than expected Posted: 04 Nov 2010 01:02 AM PDT Halifax HPI m/m came in at 1.8%, stronger than the 0.4% expected and -3.5% prior reading. Gbp/Usd is trading slightly firmer, currently 1.6153.

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