Risk trends favored moderate greenback losses overnight on the back of stronger U.S retail sales data, but gains across high-beta currencies were limited as lingering concerns from both side of the Atlantic remaining common place. The Kiwi and Aussie led, while the Euro remained largely flat against the greenback as investors continued to second guess some of the more vexing themes from the Euro region, with Spain and Greece still in the firing line.US retail sales climbed 1.1 percent in September; outpacing expectations of a 0.8 percent rise. Positive revisions from July to August were also look upon favorably with a rise of 1.2 percent from the originally report 0.9 percent gain. Still, the economic data pulse continues to show conflicting signs with the release of the New York Empire Index showing manufacturing in the region remains in contraction territory, but still improved slightly from September. Stronger than expected earnings from banking heavyweight Citigroup also kept the balance of risk to the upside, with banking stocks leading a bounce across U.S equities. It's apparent markets are positioned for a less-than-inspiring round of earnings from corporate America, increasing the potential for upside surprises. The DOW and S&P closed higher 0.72 and 0.81 percent respectively.
A rail worker gives information to passengers during a transport strike at Sants station in Barcelona
Offsetting some of the more positive themes was reports talks between Greece and the Troika won't be concluded before the Summit of European leaders on Thursday. Despite earlier optimism by Prime Minister Antonis Samaras that the impasse on budget reform will be bridged before Thursday summit, overnight Finance Minister Yannis Stournaras said they are unlikely to strike a deal before the meeting, stating, "negotiations will continue until the EU summit and after it." Greece is trying to find an additional 13.5 billion euros in cuts and it's expected without the next 31.5 billion euro bailout installment, the country will run out of funds by November. Still prospects of a bailout for Spain kept a steady flow of bidders to the Euro which stayed within its current range near to current levels of $US1.2950.
The day ahead will see the focus turn to the Reserve Bank minutes for the October meeting, which saw the bank slice 25bps from the official cash rate. The ensuing statement featured a rather colorless assessment of global economic conditions, noting sub-par growth in Europe while acknowledging headwinds to the US growth trajectory. The statement also highlighted recent indicators suggesting China's growth has slowed, noting "uncertainty about near-term prospects is greater than it was some months ago." This marks a delicate softening on Chinese growth expectations, which has previously been flagged by the bank as signs of more "sustainable" growth. The bank also reiterated the peak in resource investment is "likely to occur next year" and may be at a lower level than earlier expected." Once again the high Australian dollar received a mention but failed to expand on their well known views the exchange rate has remained higher than expected, given the decline in commodity prices and weaker global outlook. Money markets have been quick to price in near certain odds of a Melbourne Cup day rate cut, but despite the statements lack of colour, there's little to suggest the RBA will begin a series of cuts. The final paragraph sums it up nicely noting the board considered it appropriate for the policy to be "a little more accommodative." The question remains, how much is enough? Investors today will no doubt be scouring through the minutes looking for the answer; however it's clear a follow-up rate cut in November is not a foregone conclusion. At the time of writing the Australian dollar is buying 102.45 US cents.
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