By Dean Popplewell

What would we do without JPY? Amongst the G10, it was the outright go to currency pair that generated most of the overnight excitement, breaching 80.00, the psychological benchmark on no meaningful data. There is a possible list of negatives, like a warning from Moody’s that the ongoing impasse over funding the Japanese budget deficit is credit negative or perhaps the poor earnings season unfolding in Japan could be blamed. The disappointing BoJ policy ease this week is already history, so that is a no go.

Stops were taken out as high as 80.11. Dealers note that offers appear ahead of 80.40-50, with the latter quote a presumed option barrier level. We can expect, that with a very good NFP tomorrow and generally higher U.S. yields, for these levels to be at least threatened medium term. The latest flow data continues to show outflows from the Japanese

By Dean Popplewell

The Canadian economy unexpectedly shrank by 0.1 percent in August from July, pointing to slower growth in the third quarter than in the first half of the year and supporting a Bank of Canada message that interest rate hikes are less imminent.

The surprisingly poor performance prompted economists to mark down their forecasts and sent the Canadian dollar skidding to a session low against its U.S. counterpart.

The Canadian economy recovered more quickly than most from the global recession, and is set to grow at slightly more than 2 percent this year despite uncertainty from the choppy U.S. recovery and the European debt crisis.

The dip was the first monthly fall in GDP since February, and was largely caused by decreased production in the natural resources sector – oil and gas extraction and mining – as well as in manufacturing, Statistics Canada said on Wednesday.

Maintenance work

By Dean Popplewell

Stateside investors will be trying to get back to some sense of normalcy today, but expect it to be a longer haul for Wall Street. It will come as no surprise to see many of the Big Apple's traders sit out the remainder of the week amid the chaos of Hurricane Sandy and its aftermath. For the rest of us, two days of non-trading is an eternity. Markets now must reprice all assets and securities from Friday’s close, factoring in Sandy’s aftermath, corporate earnings, month-end portfolio re-balancing and next week’s U.S. elections, among other issues.

Which direction these markets will go on the U.S. open is so far edging towards slightly negative, but expect month-end business to distort some of the directional flow -- just like the dollar slipping on the European open this morning and printing above the psychological 1.3000 EUR level. It’s a “big” surprise;

By Dean Popplewell

It difficult to remain engaged in a market that is nearly almost closed this side of the Atlantic. Participants are very much distracted by Hurricane Sandy’s images of destruction that dominates all forms of media. By day’s end, she is expected to cause as much as $20b in economic damage just being one of the biggest Atlantic storms that has made landfall. We are constantly reminded that it’s the first time in over a century that weather has stopped U.S. equity trading for two consecutive days. Pricing and liquidity were an issue for FX in late afternoon yesterday and should be again this morning, that is until more participants are willing to engage in the FX market.

Spain was expected, the market had been pricing it in, to ask for aid at the last Euro-group meeting in early October. However, she disappointed and many FX positions were

By Dean Popplewell

Market focus Stateside will be on Hurricane Sandy and not on trading books. With Sandy barreling towards the U.S.’s Northeast coast, has pressured President Obama to sign emergency declarations for several states, including New York. Some low-lying NY boroughs have since come under evacuation orders by Mayor Bloomberg. All U.S. stock and options markets will be closed today and this closure could stretch into tomorrow. European Insurers are already trading in the red as a result of this natural phenomenon and forcing European bourses under water this morning.

It seems that Greece is no closer to an agreement with Troika on reform measures to unlock the next tranche of funds that this country desperately wants. Reports over the weekend suggest that the auditors will demand a further 150 additional reforms. Some of the creditor demands include the loosening of the hiring/firing laws, changes on the minimum wage

By Dean Popplewell

As the euro investor digests a plethora of earnings reports, the single currency has been dragged higher this morning, mostly by its compatriot, Sterling, and into a territory where sellers tend to domicile. Overhanging recent events in the U.S. and the eurozone are doing nothing to instill further confidence to really push these markets much higher from here.

The U.K. economy has gone from a recession to posting the best quarterly performance in five years. This morning’s Q3 GDP print grew by +1%, beating market expectations of +0.6%. Expect the BoE to be looking past the GDP volatility within, as the report was certainly flattered by once off events, bringing into question the sustainability of the U.K. recovery. The impact of the Jubilee celebrations and Olympics is likely to have added +0.6% to the GDP. Deducting this from the headline and we get a reasonable +0.4% growth

By Dean Popplewell

For the FX trader the answer seems to be to follow equities. So far, stock moves look to be pushing FX back into risk averse mode. There was a short reprieve to abate risk attitudes at the Asian open when investors welcomed an improvement in Chinese manufacturing data. The October flash HSBC manufacturing PMI improved to 49.1 compared with a final reading of 47.9 in September. However, European data has managed again to disappoint, hurting the EUR and able to provide further proof that the eurozone remains firmly stuck in recession. Global slowdown in growth, lower earnings and Spanish woes are a cocktail of mixes that will continue to weigh on risk appetite.

The decline in eurozone business activity has deepened in October, suggesting that the euro economy has made a poor start to Q4 and that a recovery is a long way off in the horizon.

By Dean Popplewell

It’s a pivotal week for the loonie, starting with today’s retail sales data release for September and the BoC monetary policy rate announcement half an hour later. Tomorrow we have the MPR report. Last week’s weaker-than-expected September CPI release coupled with the dovish comments from Governor Carney has the loonie under-performing outright and against the crosses. The FI market is even pricing in a cautious rate and MPR statement. Later this morning, many expect Carney to change the bank’s current “eventual” stance to neutral. Tomorrow, do not be surprised to see growth forecasts modestly revised for this and next year.

Pricing models have the BoC remaining on hold at 9am EST (+1%). More doubt surrounds the tone of the statement, given the absence of hawkish elements in comments released by Governor Carney last week. The BoC has maintained a hawkish guidance throughout recent months, but market expectations

By Dean Popplewell

Today marks the end of the euro area leaders summit, and statements and comments released so far are consistent with many analysts’ thoughts that the summit would yield very little in terms of policy. However, once again the gathering has been sold as a success as a compromise was reached on the timetable for establishing a Single Supervisory Mechanism.

According to Merkel, this two day EU summit was not for decisions it was about putting things on the right track. A banking supervisor role and a common budget for the eurozone had been the main topics of choice, but Greek financing problems and the possibility of a Spanish bailout were discussed on the sidelines.

The Germans, the Dutch and Finns voiced their opposition to certain changes, concerned about placing weaker member nations risk on the EU balance sheets. However, a banking supervisor is required to allow the

By Dean Popplewell

To date, the EUR has been hitting all the high notes, just in time for the main event this week, the EU summit meeting. Many investors had been waiting for this meeting's outcome before applying their own proactive trading strategy. They have been hoping for further clarity on how eurozone leaders intend to tackle the financial situation in Spain and Greece. In doing so, they have missed participating in the single unit’s risk on trade special that has occurred this week. So far, global bourses remain supported on upbeat U.S. housing numbers and as China’s Q3 GDP met expectations. Growth data was just part of a data deluge from China that is supporting the risk trade. The headline print supports the idea of a soft landing for the economy and perhaps no strong push for further policy easing by the PBoC.

China’s GDP grew +7.4%, y/y in

By Dean Popplewell

There is a sense of renewed optimism in capital markets this morning. Speculation of a Spanish application for a precautionary bailout is providing positive fodder for the EUR. Along with Moody’s reaffirming Spain’s rating at investment grade, this has been able to guide the single unit to test new weekly highs ahead of tomorrow's European Economic Summit.

Despite fears of an imminent cut, Moody’s maintained Spain’s government bond rating at Baa3, one notch above junk territory. The agency believes the measures that the Spanish government, the EU and ECB collectively have taken so far should allow the country to stabilize its ballooning debt levels. It seems that the opposition to a Spanish request for a second round of EU aid is withering; perhaps it’s clearing the way for the first use of the ECB bond buying program. Could this week’s Euro-summit potentially be a forum for a

By Dean Popplewell

Risk this morning is being tentatively applied on signs of stronger fundamentals in the U.S. economy. Spain, too, appears to be softening its stance on seeking financial assistance. A senior Spanish official revealed yesterday that Madrid is considering a request for a line of credit from the EU’s new bailout program. To date, the Spanish prime minister has been playing a dangerous strategy, betting that another bout of market turmoil would enable him to broker better terms over German resistance. Rajoy’s perverse way of thinking is that “the worse that it gets, the better it is” for Spain. Everyone realizes that defending Spain is crucial because its economy doubles the output of Greece, Ireland, Portugal and Cyprus combined. Perhaps, finally, we are witnessing the Iberian country’s first details of their plans for support, before its debt problems become wholly uncontrollable. Investors seek more assurance, especially after S&P

By Dean Popplewell

Looking at the price action that took place in the overnight session, one can only say that it was somewhat confusing and predominantly technical in nature. In early morning Asia, the single unit was making an assault on 1.29 and a few hours later, the EUR is contemplating taking on Friday’s top tier prices. Even USD/JPY has decided to trade at new highs essentially on no fundamental news. It’s Softbank and its M&A activity that is providing the myriad of reasons to favor a softer yen. Without this potential takeover, the currency pair range bias implies that there is only value to be buying the dollar on dips against the yen. In Europe, continued market worries around Spain and Greece have been capable of keeping global equities gains and the EUR trading somewhat muted to last weeks closing prices.

Chinese data was unable to garner any Asian

By Dean Popplewell

The majors are managing to hold the status quo in another uneventful overnight session. FX traders are equity watching, FI dealers are equity watching and the equity dealers are waiting for JPM and WFC to report their Q3 earnings release where there is an area of caution. So far, the US earnings season has disappointed and is encouraging investors not to throw caution to the wind. The release of these two titians numbers will give investors an insight into the health of the US financial system. The rest of us, who are not interested in equities, continue to speculate about whether Spain will request financial assistance from its European partners. This negative news so far has been taken as a positive for the single unit as it heightens market expectations of a Spanish bailout request and OMT. However, true to form, Spanish officials remain stubborn, their right,

By Dean Popplewell

It seems that S&P officially has run out of patience with the euro authorities. The real surprise about the Spanish Debt downgrade is that it was announced late Wednesday and came from S&P rather than Moody's. Overall, it's not that surprising given the lack of growth prospects for Spain and with that negativity reinforced by questions over the ESM's funds. Will the emergency's program monies be used to recapitalize banks? Previously, S&P had reassured investors by affirming its ratings on Spain on the premise that euro assistance to Spanish banks "would be liable on a region wide basis and not held to individual sovereigns." The rating agency's action will likely add to the pressure on Prime Minister Rajoy to seek external assistance maybe as early as next week's EU summit. The next move will be much tongue wagging from supposedly ambivalent Spanish authorities.

Moody's currently has a

By Dean Popplewell

What is this market waiting for now? The U.S. debates, CPI and/or U.S. November employment numbers? Whatever it is, this market is lacking true conviction. Price movements are being easily influenced by headlines and not technicals. Big picture direction is 50:50 so it seems, and a flatline price movement with a spike seem to prove that. So far the single unit has managed to claw back from its early bashing in the Far East, a follow-on from the previous session. That said, underlying sentiment seems to be risk adverse, as markets continue to eye the Spanish and Greek budget and bailout situation. As outlined previously, global equities loss and growth outlook should manage to keep the EUR and risk on the back foot for the time being.

With little to scratch on the surface, investors will want to keep an eye on further headline news from the

By Dean Popplewell

Just when you thought it was safe to enter the water the EUR takes flight. This morning's move has “rocked a few boats,” mostly because very few individuals had been expecting the 75-cent EUR leak. In the post move, the market has seen Mideast sovereigns and Japanese Real money happily buying from the lows. The natural reaction of this morning session, traders who are returning from their long weekend, would be to fade the rally on the back of negative short term technicals. The problem is that many will now be entering new positions at the center of “recent” extremes. With history repeating itself, it will indicate that this positioning, too, can also be a recipe for disaster. It may be preferable for NY to seek stops on the top side rather than jump two feet first.

Many have been at a loss to explain this morning's

By Dean Popplewell

European Central Bank President Mario Draghi said the bank is ready to start buying government bonds as soon as the necessary conditions are fulfilled, putting the onus on Spain to decide whether it wants a bailout.

The ECB is ready to undertake Outright Monetary Transactions “once all the prerequisites are in place,” Draghi said today at a press conference in Ljubljana, Slovenia, after policymakers left the benchmark rate at a historic low of 0.75 percent. The plan has “helped to alleviate tensions over the past few weeks” and “now it’s really in the hands of governments.”

A month after Draghi unveiled the unprecedented bond- purchase plan to lower yields on government debt, Spain, the country most likely to take up the offer, is still mulling whether it wants to accept the conditions attached. At the same time, the euro-area economy probably entered a recession in the third

OPEC is currently pumping oil at record amount, while US oil production has hit highest level since 1997. On the demand side, we are seeing transport companies such as FedEX issuing slow down warnings. This slowing down of demand is in-line with the global concerns over Europe and China. With supply going up and demand coming down, Crude bulls will be getting more worried each day even before US flood the supply from its Strategic Petroleum Reserve.

CNBC interviewed Andrew Lipow, president of Lipow Oil Associates – a consulting firm specializing in oil. He believes that bulls who were “enthusiastic” about bullish prospect after QE3 are reconsidering their long positions. There is some credence to that as we’ve seen oil prices dropping sharply the week after QE3 has been announced, instead of bringing oil close to 2012 highs.

Brent Crude Weekly

By Dean Popplewell

The market downtrend continues to develop. It is difficult to get individually enthusiastic when it's a tight range despite the volatility within that range. It’s even more suffocating to try to express certain trading strategies within that defined range. This has been the only theme that investors have witnessed over the past two trading sessions. However, thank Spanish bad debt data for having opened up this morning's range. Bad debts held by Spanish banks hit a record high in July (+$222b or +10% of credit) and deposit outflows (-7.8%, y/y) are gaining pace as the Spanish banking system sufferers a deeper economic and financial crisis.

Overnight, regional equities have drifted lower as the boost from the Fed’s bond buying program announced last week dissipates. To date, investors have wanted to know how long the exuberance of QE3 was going to last. Not long it seems, would be