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CAD, AUD, NZD Rise in Risk-on Markets, JPY Selling in Force

Commodity currencies rise broadly today on the back on risk-on sentiments. Major European indexes are trading up while US futures also point to higher open. Yen is extending recent broad based decline since though treasury yields are in retreat. Dollar and Euro are following as next weakest. Sterling and Swiss Franc are mixed, helped by buying against Euro, Dollar and Yen.

Technically, CAD/JPY has taken out 91.16 resistance earlier this week to resume medium term up trend from 73.80. Now, it’s NZD/JPY turn to take on 80.17 resistance. Break there will resume the up trend form 59.49 for 61.8 projection of 59.49 to 80.17 from 74.54 at 87.32. AUD/JPY is lagging behind, but firm break of 85.78 will also resume the up trend form 59.85 to 61.8% projection of 59.85 to 85.78 from 77.88 at 93.90 in the medium term.

In Europe, at the time of writing, FTSE is up 0.82%. DAX is up 1.23%. CAC is up 1.15%. Germany 10-year yield is down -0.046. Earlier in Asia, Nikkei rose 1.46%. China Shanghai SSE dropped -0.10%. Singapore Strait Times rose 0.27%. Japan 10-year JGB yield dropped -0.0048 to 0.085.

US initial jobless claims dropped to 293k, continuing claims blow 2.6m

US initial jobless claims dropped -36k to 293k in the week ending October 9, much better than expectation of 325k. That’s the lowest level since March 14, 2020. Four-week moving average of initial claims dropped -10.5k to 334k, lowest since March 14, 2020.

Continuing claims dropped -134k to 2593k, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -30.5k to 2738k, lowest since March 21, 2020.

US PPI jumped to 8.6% yoy in Sep, highest on record

US PPI for final demand rose 0.5% mom in September, matched expectations. For the 12-month, PPI accelerated to 8.6% yoy, up from 8.3% yoy, below expectation of 8.8% yoy. But that’s still the largest 12-month advance on record since 2010. PPI core rose 0.2% mom, 6.8% yoy, versus expectation of 0.4% mom, 7.1% yoy.

ECB Lagarde: No evidence of significant second-round effects of inflation

ECB President Christine Lagarde repeated today, “we continue to view this upswing as being largely driven by temporary factors. The impact of these factors should fade out of annual rates of price changes in the course of next year, dampening annual inflation.”

“So far, there is no evidence of significant second-round effects through wages and inflation expectations in the euro area remain anchored, but we continue to monitor risks to the inflation outlook carefully,” she added.

On the other hand, Governing Council Member Olli Rehn said, “due to persistent production bottlenecks, it is possible that an increase in energy prices has a longer-lasting impact on consumer price. We analyze this development carefully at the Governing Council and at the Bank of Finland.” He noted that medium-term inflation expectations have increased to around 1.9%, which is in line with the European Central Bank’s strategy.

BoE Tenreyro: Self-defeating to try to respond to short-lived effects on inflation

BoE MPC member Silvana Tenreyro said, “part of increasing inflation we have seen so far is arithmetic base effects compared to a low level of prices last year.” And that in part has seen “driven by global prices in energy and other commodities which push up on inflation”. And, “these effects in general tend to be short-lived.

Additionally, there were “temporary supply disruptions caused by the various imbalances in the global economy as it recovers from Covid”, with some countries still in lockdown. Demand was also boosted “far more by fiscal stimulus in some countries than others”, like the US.

“So typically, for short-lived effects on inflation, such as the big rises in the prices of semiconductors or energy prices, it would be self-defeating to try to respond to their direct effects,” she said. “By the time interest rates were having a major effect on inflation the effects of energy prices would already be dropping out of the inflation calculation. If some effects were to prove more persistent it would be important to balance the risks from a period of above target inflation with the cost of weaker demand.”

BoJ Noguchi: Economic recovery will become clearer at t