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European Session: Waiting on Eurozone GDP

With a light calendar today, markets should continue to consolidate. Concerns over reports that China might increase the rate of CNY appreciation are also still lingering. Softer equities in Asia have coincided with USD strength, but with European stock staging a subtle comeback (volumes continue to be unimpressive) we are seeing EUR buyers step into the fray. Commodities were generally lower and crude is at wti $77.40. The EURUSD traded between 1.4825 and 1.4895, while spot Gold climbed steady upward to $1108oz. JGBs have produced the most interesting moves this week, with 10-yr JGB yields falling from a close of 1.4690 on Monday to 1.3370 in today’s trading. There has been plenty of speculation regarding the budget and when some positive buzz hit the markets investors were caught short.

The key release of the day will be the Eurozone Q3 GDP, which should reveal that the economy has moved out of recession. However, data released this morning suggest that the region expanded slower in Q3 than the market had expected. Aggregate GDP figures from Germany (+0.7% q/q), France (+0.3% q/q) and Italy (+0.6%) all printed rather smaller gains than expected, given monthly industrial production data and some of the business surveys. The new data seems to suggest that the risk of a disappointing figure has increased.

In the US session, the US trade balance will be released. The latest rise in the oil price is likely to boost the value of oil imports by another $3bn, pushing the trade deficit wider in September. And to wrap up the release week U. of Michigan consumer confidence survey should provide some guide as to whether the dip in the Conference Board measure in was just a one off or the start of a renewed downward trend. Lower gasoline prices, the rise in the S&P 500 combined with drop in initial jobless claims hint that confidence should resume its plodding upward trend. As always, a slew of speakers could provide market volatility.

APEC summit will be held this weekend in Singapore. The market will be listening for specific rhetoric on currency flexibility and policy exit strategies.

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