Americas Dollars took the back seat

The North “Americas” had little data to feed off this week. It is a shortened trading week with most of the FX action occurring in the “other” trading time-zones. The majority of the “major” dollar action occurred on the back of toxic Euro headlines, Italian yields ballooning and political decisions still under scrutiny in a couple of the periphery regions.

This is a big political weekend in Rome. Market is ending the week on a positive note, not in the sense that risk is wholly back on the table, but because of prudent risk management has dealers taking some of their long dollars back off the table. Investors expect the ECB to protect their own domain more aggressively next week. Lack of any sign of them and dealers will be shouting ‘we will see you below”!

Below are some of the highlights of the week:

AMERICAS

• IMF chief, Christine Lagarde insisted that China needs a stronger currency in real exchange rate terms. China should be working to strengthen domestic demand and de-emphasize exports as a driver of Chinese growth.
• Helicopter Ben continues to whistle the same tune. In his public appearances this week he said that policy makers are concentrating “intently” on reducing unemployment and projects inflation to stay under control for the “foreseeable future.”
• US Treasury auctions received a mixed response this week, as expected, the short end (+$32b 3’s) was well received. However, 10’s (+$24b) and long-bonds ($16b) were taken down in a “tepid” environment.
• USD: Initial jobless claims fell last week by -10k to +390k. The release was flattered by seasonal factors. Continuing claims plummeted -92k, the steepest decline in a year to +3.615m
• USD: Trade deficit dropped to -$43.1b in September, mostly on the back of strong export growth expanding +1.4% to +$180.3b. It was no surprise to see the value of the dollar being the biggest positive factor.
• CAD: Recorded a surprise Trade surplus in September (first in eight months) +$1.25b. The market had been expecting a trade deficit of -$560m.
• USD and CAD respected Veteran’s Day.

Other Links:

EUROPE Week in FX
ASIA Week in FX
Politics and Fixed Income trump FX