ECB rate decision leaves little margin for surprise

US Dollar:

By looking at the dollar by itself, we are able to discern relatively little other than it is under signifi-cant pressure. It is the contrast between the performance of the currency and the other major asset classes that really gives us a fundamental assessment of its troubles. In the wake of the FOMC’s decision to expand its stimulus efforts by an additional $600 billion Wednesday, market participants are trying to assess just how se¬vere the damage is to the dollar via the naturally increase in money supply and the subsequent encouragement for speculative capital to flow out of the US system to seek out higher return elsewhere. From this elemental, supply-and-demand depreciation though it is difficult to separate the influence that risk appetite trends are hav¬ing on the currency. This is a passive outflow of funds as investors continue to unwind safe-haven based posi¬tions that were denominated in dollar as well as an active haemorrhaging of speculative capital that simply wants to seek yield while avoiding inflation. The risk component of the dollar’s decline is important to benchmark with Friday’s top event risk. It may seem that the October nonfarm payrolls report wouldn’t encourage much of a reaction from the dollar as the market is preoccupied with the drugging effects of easy leverage and risk guaran¬tees through stimulus. Yet, if risk appetite is indeed responsible for the advance in capital markets and subse¬quent pressure on the greenback; then a significant shift in the employment figures could amplify or curb the impulse to feed high return positions. Looking at the consensus forecast, economists are calling for a 60,000-increase in net payrolls.
DATA: Non Farm Payrolls, Unemployment rates, Pending Home sales and Fed Chair Bernanke speaks

Pound:

UK Producer Price Index figures are set to show the annualized wholesale inflation rate held steady at 4.4 percent in October, snapping five consecutive months of losses. The outcome is unlikely to prove market-moving after the Bank of England kept monetary policy unchanged at yesterday’s meeting of the rate-setting MPC committee. The focus now turns to next week’s release of the Quarterly Inflation Report, with markets keen to size up the central bank’s thinking about the necessity and timing of additional stimulus to guard against a slide back into recession following the onset of the government’s far-reaching deficit reduction plan.
DATA : PPI Input

Euro:

Euro Zone Retail Sales growth is expected to accelerate, with receipts adding 1.4 percent in the year through September, capping the strongest quarter in three years. The outcome may prove supportive for the Euro, reinforcing expectations that the European Central Bank is unlikely to follow some of its top counterparts notably the Fed and BOJ and possibly the BoE down the road of additional monetary stimulus. German Factory Orders are set to slow however, adding 19 percent in the year to September to reinforce the downtrend in place since April and raise a red flag about the health of Euroland’s top growth engine, the German export sector.
DATA : Retail sales and German factory orders

General:
• The Reserve Bank of Australia’s Quarterly Monetary Policy Statement proved of far greater interest as policymakers curiously lowered their near-term inflation forecast, saying the recent gains of the Austra-lian Dollar have played a “stabilizing role” in offsetting upward price pressure from the resource export boom and seemingly laying out an argument for fewer rate hikes down the road despite the hawkish tone to its policy statement earlier in the week.

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