NEWS / Foreign Exchange

Treasury Market Preview

• *** ECONOMIC SCHEDULE ***
• US Oct Consumer Confidence: 99.0e || 98.8 prior [10:00 et]
• *** REGARDING THE FED/US MARKETS ***
• The market is convinced the Federal Reserve will cut interest rates tomorrow, but for the Fed itself, it is a closer call. The behavior of financial markets implies near certainty by investors of a quarter-point cut in the Fed's key short-term interest rate. But for policy makers, the decision is between the quarter-point reduction and no cut at all. A half-point cut is unlikely to get serious consideration from Fed officials, though some in the market expect it. [WSJ]
• The central bank seems very likely to cut rates again this week when its policymaking committee meets today and tomorrow. Markets expect a 25 basis-point cut in the federal funds rate to 4.5 per cent after last month??™s surprise 50 basis-point cut. It might choose to blindside us again and do another half-point cut, but I doubt it. One surprise is a welcome boost. Two looks like panic [UK Times]
• Three of the biggest US private equity firms have each held preliminary talks about selling a minority stake to China??™s giant Social Security Fund, people familiar with the negotiations say. [Financial Times]
• Why a Fed rate cut could backfire: Urgently needed foreign capital will flee the dollar and interest rates will rise if the financial markets think the Fed has lost sight of its main role - controlling inflation. And with all commodities - not just oil ??“ rising rapidly, that day could soon come. Interest rates - including mortgages - have fallen in the past few weeks as it becomes quite evident that the economy is slowing and as investors seek the relative safety of government bonds. [NY Post]
• *** EUROPEAN NEWS OVERNIGHT ***
• GE Oct Unemployment Change: -40K v 30Ke || Unemployment Rate: 8.7% v 8.7%e [Lowest since June 1993]
• GE Sep Real Wholesale Sales: M/M ??“0.2% v ??“0.9% prior || Y/Y ??“1.7% v 1.2% prior
• FR Sep Housing Starts: 12.9% v 13.3%e
• FR Sep Housing Permits: 3.2% v 0.1% prior
• FR Q3 Manufacturing Survey Demand Outlook: 14 v 17 prior|| Foreign Demand Outlook 10 v 16 prior
• SW Riksbank raises interest rates by 25bps to 4.00% as expected
• SW Sep Retail Sales: M/M 2.6% v 0.9%e || Prior revised from ??“0.9% to ??“1.2% |||| Y/Y 9.9% v 7.5%e || Prior revised from .9% to 7.3%
• IT Sep PPI: M/M 0.5% v 0.2%e || Prior revised from 0.1% to 0.2% |||| Y/Y 3.5% v 3.1%e || Prior revised from 1.9% to 2.1%
• SZ Sep UBS Consumption Indicator: 1.992 v 1.932 prior || Prior revised from 1.932 to 1.950
• SW Riksbank: Forecasts the repo rate at 4.25% by 1H of 2008
• SW Riksbank: Forecasts CPI at 2.9% in 2008 vs. the previous forecast of 2.3% || Forecasts CPI at 2.4% in 2009 vs. the previous forecast of 2.3%
• ECB Wellink: The ECB remains concerned about inflation
• ECB Wellink: The slowdown in growth is likely to be greater than forecast
• ECB Wellink: Says that he is not concerned about the Euro FX rate || EMU exports are doing well
• *** ASIAN NEWS OVERNIGHT ***
• Japan sells ??1.53T in 2-year notes with an average yield of 0.778% and a bid-to-cover of 3.8x || the bid-to-cover compares to 3.45x at the previous auction [23:45 et]
• JP Sep Jobless Rate: 4.0% v 3.8%e
• JP Sep Job-to-Application Ratio: 1.05 v 1.06e
• JP Sep Overall Household Spending: 3.2% v 1.4%e [highest since May 2004]
• JP Oct Small Business Confidence: 47.8 v 49.1 prior
• NZ Sep Building Permits: -8.3% v 5.8% prior || Prior revised from 5.8% to 5.2%
• NZ Sep M3 Money Supply Y/Y: 9.4% v 8.4% prior
• SK Sep Industrial Production: M/M 0.3% v ??“1.0%e || Y/Y ??“0.1% v ??“1.2%e || Prior revised from 0.8% to 0.7%
• Singapore Monetary Authority maintains its 2008 growth target of 4%-6% in its macroeconomic review.
• Singapore Monetary Authority: GDP is likely to reach or top the 7%-8% range
• Singapore Monetary Authority: Sees the risk of a possible sharp slowdown in the US economy.
• JP Finance Minister: Trying to avoid any impact on markets when managing FX reserves
• Korean Central Bank intervenes in the market, buying US Dollars [wires overnight]
• The Indian Central Bank kept both its repo and reverse repo rate unchanged overnight at 7.75% and 6.00% respectively as expected, and unexpectedly raised its cash reserve ratio by 50bps to 7.50%. The central bank reiterated its 2007/08 GDP forecast of 8.5% and reiterated its 2007/08 inflation goal of around 5.0%
• The Philippine Peso rose to it highest level against the US Dollar since July of 2000 overnight