The dollar is trading mixed against the majors and the dollar index is back below the 80.00 figure as ranges persist amid a lack of market moving news or economic data. European sovereign yields1 are broadly lower after industrial production beat expectations in France and Italy and as high level meetings between heads of state continue. Spanish Prime Minister Rajoy and French President Hollande met today and both agreed that the EU should implement June summit decisions such as a banking union. Rajoy said that he aims to prove IMF forecasts wrong, as we have previously noted Spain's optimistic growth forecasts may be cause for concern as it impacts deficit ratios.
French and Italian industrial production surprised to the upside with August monthly increases of +1.5% (cons. -0.3%) and +1.7% (cons. -0.5%) respectively. Yearly changes remained negative with France showing a y/y decline of -0.9% from the prior -2.8% and Italy -5.2% from the prior -7.2%. Manufacturing production was also released in France with a +1.8% change on a monthly basis (cons. -0.7%). In Germany, the wholesale price index climbed 1.3% m/m and 4.2% y/y. Sovereign yields1 are lower across Europe, most notably in Spain and Portugal. EUR/USD is relatively unchanged on the session and consolidating above the 200-day simple moving average (SMA) which comes in around 1.2820.
Japanese officials warn against JPY gains
In Japan, official rhetoric escalated with Prime Minister Noda saying that he expects “decisive” Bank of Japan action at the right time. BoJ Governor Shirakawa was also on the wires and warned that rapid JPY gains can affect the economy and inflation. He also noted that the Bank is conscious of the JPY level when setting monetary policy and clarified that direct intervention is up to the government. The comments resulted in only marginal yen weakness so far today.
Data Watch: Beige Book, Fed speak
US wholesale inventories rose by more than expected with a gain of 0.5% (cons. 0.4%, prior 0.6%). Later today, the Fed's Beige Book will be released at 1400ET and this afternoon will also see a number of Fed speakers including Kocherlakota (1445ET), Tarullo (1630ET), and Fisher (1645ET).
