Sterling Surges on Possible Quantitative Easing Pause

* The dollar traded mixed on Thursday, sharply lower versus the pound and markedly higher against the yen. US consumer-price inflation rose slightly more than expected while initial jobless claims fell to the lowest level since January. The S&P 500 index rose 4.54 points to 1,096.56 on good earning announcements. The yen fell as investors covered short GBP/JPY positions. The euro pared overnight gains, pressured by falling eurozone consumer-price inflation. A new yearly high in crude oil prices did not boost the Canadian dollar. The oversold USD/CAD rallied after touching a 14-month low at the 1.02 handle, supported by weaker-than-expected Canadian manufacturing sales and fear of a Bank of Canada intervention. The Australian dollar was supported by Reserve Bank of Australia Governor Glenn Stevens’ comment that the RBA can’t be too timid in raising interest rates.

* The GBP/USD surged on short covering after surprising comments by Bank of England’s Paul Fisher that the BOE may pause its quantitative easing policy. Fisher said policy makers would be more likely to pause asset purchases, giving themselves the option of “doing more later” rather than stopping them. The GBP/USD has strong support in the 1.58 area and important resistance in the 1.64. The pair’s outlook has improved somewhat, but the trend remains negative.

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Financial and Economic News and Comments

US & Canada

* US consumer prices increased 0.2% m/m in September, as forecast, after rising 0.4% m/m in August, CPI data from the Labor Department showed. The CPI fell 1.3% y/y. Energy prices climbed 0.6% m/m in September after jumping 4.6% m/m in August. Food prices declined 0.1% m/m in September. The core CPI, which excludes food and energy, increased 0.2% m/m in September and climbed 1.5% y/y, slightly higher than expected. Real average hourly earnings declined 0.1% m/m in September but rose 4.4% y/y. •

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* The improving US economy is leading to a clear downward trend in joblessness. US initial jobless claims fell 10,000 to a lower-than-expected 514,000 in the week ending October 10, the lowest level since January, from the previous week’s upwardly revised 524,000, according to figures from the Labor Department. The 4-week moving average of new jobless claims declined 9,000 to 531,500. Continuing claims in the week ending October 3 dropped 75,000 to 5,992,000, the lowest level since March, from the preceding week’s upwardly revised 6,067,000. The 4-week moving average of those continuing claims decreased 68,250 to 6,082,750. The insured unemployment rate for the week ending October 3 declined to 4.5% from the prior week’s upwardly revised 4.6%.

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* The New York Fed general business conditions index unexpectedly soared to 34.6 in October from 18.9 in September, indicating manufacturing in the New York region expanded for a third straight month and reached its highest level since mid-2004, according to the Empire State Manufacturing Survey, released by the Federal Reserve Bank of New York. The new orders index climbed to 30.8 in October from 19.8 in September, while the shipments index jumped to 35.1 from 5.3. Employment conditions improved in October, with the employment index rising to 10.4 from September’s -8.3. The prices paid index declined slightly to 19.5 in October, a positive reading for a fourth straight month, from 20.2 in September, while the prices received measure remained negative at -5.2 following September’s -3.6. “Future indexes advanced to relatively high levels, indicating that respondents expect conditions to improve further in the months ahead,” the NY Fed said.

* The Philadelphia Fed manufacturing index declined to a lower-than-expected 11.5 in October from 14.1 in September that was the highest since June 2007, the Federal Reserve Bank of Philadelphia’s October 2009 business outlook survey showed, indicating manufacturing in the Philadelphia region expanded for a third month albeit at a slower pace. The new orders index remained positive for a third month in October, rising to 6.2 from 3.3. The shipments index also registered a positive reading for a third month, although declining to 3.3 from 8.2. The employment index increased to -6.8 in October from -14.3 the prior month. The prices paid index rose to 21.3 in October from 14.9 in September; the prices received index advanced to -4.3 from -10.6.

* Canada’s manufacturing sales fell a more-than-expected 2.1% m/m to C$40.9 billion ($39.6 billion) in August after a downwardly revised 5.2% m/m increase in July, led by the decline in sales in the aerospace product and parts and motor vehicle industries, figures from Statistics Canada showed. Production in the aerospace product and parts industry fell 35.6% m/m to C$1.2 billion in August. Excluding the fall in aerospace, manufacturing sales declined 0.6% m/m. Manufacturing sales in the motor vehicle industry were down 6.3% m/m to C$3.1 billion. New orders increased 0.2% m/m to C$38.5 billion in August. Inventories slid 0.7% m/m to C$61 billion, a seventh consecutive decline. The inventory-to-sales ratio increased to 1.49 in August from 1.47 in July.

Europe

* Eurozone consumer prices fell 0.3% y/y in September, a fourth consecutive year-on-year fall, after a 0.2% y/y decline in August, September CPI data from Eurostat showed, matching an initial estimate released on September 30. Monthly consumer-price inflation was unchanged m/m, following August’s 0.3% m/m increase. The core inflation rate decelerated to 1.2% y/y in September, the lowest since February 2006, from 1.3% y/y in August.

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* The European Union-South Korea free-trade agreement, signed today in Brussels, will expand the ?76 billion ($114 billion) trade relationship by scrapping import duties and other barriers, making 99% of commerce dutyfree within five years.

Asia-Pacific

* Japan’s industrial production rose for a sixth consecutive month in August, rising a downwardly revised 1.6% m/m, after a 2.1% m/m advance in July, final August IP data from the Ministry of Economy, Trade and Industry showed, registering the longest stretch of gains in 12 years. August IP fell a downwardly revised 19.0% y/y, following July’s 22.7% y/y drop. Capacity utilization increased 2.3% m/m in August after a 3.9% m/m gain in July.

* Australia’s median expected inflation rate was unchanged at 3.5% in October, according to the latest Melbourne Institute survey of consumer inflationary expectations.

* Reserve Bank of Australia Governor Glenn Stevens said the RBA can’t be too timid in raising its key interest rate. “If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework,” Stevens said at a forum in Perth today, emphasizing that “experience here and elsewhere counsels against that approach.” While rates will require to be adjusted toward “a more normal setting” amid the economic recovery, “there are still important matters of judgment in the timing and pace of how that is done,” Stevens asserted. “Australia has had an experience that, even if labeled a recession, was a pretty mild one,” he said, adding that “the global outlook remains uncertain and the Board is very conscious of that.”

Источник: Hans Nilsson

15.10.2009