All Eyes on European Policymakers

USD is trading softer against all of its major counterparts – however the major pairs remain in recent ranges. Traders are focused on what developments will come from the first of two EU summits this weekend. UST yields are relatively flat with the 10-year yields up nearly 1 basis point. Fed speakers today include recent dissenters Kocherlakota at 1300ET and Fisher at 1320ET. There is no economic data on the calendar.

EUR range-bound as markets await news from the EU summit. Risks remain high but a credible plan could boost sentiment and provide support to the common currency while continued lack of progress and coordination is likely to put a dent in risk appetite. Topics to be discussed are bank recaps, PSI, increasing the size of the bailout fund (there have been talks of combining the EFSF and ESM). Economic data showed the German Oct. IFO declined from the prior month but beat expectations with the business climate coming in at 106.4 (cons. 106.2), current assessment at 116.7 (cons. 116.5) and expectations component as anticipated at 97.0. EUR/USD currently testing the 1.38 figure and sees a cluster of hourly SMA’s around the 1.3760 area as a short term pivot.

JPY is weaker against most of the G10 but stronger against the USD and EUR as consolidation continues. USD/JPY is currently below the 21-day SMA and not far off the record low levels while EUR/JPY is testing a cluster of hourly SMA’s currently around the 105.70 zone.

GBP higher across the board as the U.K. budget deficit narrowed in Sept. by more than expected. GBP is the strongest performer against the buck so far today (currently up +0.76%). GBP/USD is trading above the 1.59 figure after gaining some momentum on the break above recent highs of around 1.5850.

CAD advancing following higher than expected jump in CPI readings. Headline CPI for Sept. 3.2% y/y (cons. 3.1% prior 3.1%) and the core reading rose to 2.2% y/y (cons. 2.0% prior 1.9%). Oil is firmer with WTI crude currently up +1.20% to support the Loonie. USD/CAD declined to test the 1.01 figure where it is currently trading.

CHF mostly weaker after data showed an increasing money supply but firmer against the EUR and USD. EUR/CHF saw a spike lower after short term bear flag break but rebounded back above the 21-day SMA.