Market Rumours

EUR/USD little changed after retail sales, at 1.4958 from 1.4963 just before the data. USD/JPY was at 89.48 from 89.55 just before the data, while GBP/USD was at 1.6723 from 1.6723. The Dollar Index, which tracks the greenback against a trade-weighted basket of six currencies, was at 75.029 from 75.016.

EUR/GBP is looking vulnerable says Commerzbank analyst Karen Jones. Although a period on consolidation may be on the cards she says the risk of a slide below support at 0.88895 toward the 200-day MA and Fibonacci target of 0.8869 and 0.8820, has increased. Topside, Jones says the cross would need to clear resistance at 90.66 to trigger a recovery toward the 0.9250-70 zone. EUR/GBP now at 0.8950.

GBP/USD's rebound into the 1.68 area is a selling opportunity says BNP Paribas. The UK economy will likely disappoint overly optimistic expectations such as the BOE's growth forecasts, and an inflation spike in 2010 due to rising VAT and fuel costs will leave sterling with the uncomfortable mix of lower growth and higher inflation. The bank says even in an environment of a weaker dollar it expects GBP/USD's upside to be limited. GBP/USD now trades at 1.6705.

Japanese 3Q GDP surprised on the upside and confirms the recovery trend in the global economy which bodes well for risk assets and more USD selling says RBS. Add to this falling U.S. long-term Treasury yields and the bank says the risk of USD/JPY breaking out of its recent band on the downside is increasing. USD/JPY now at 89.46.

Despite those strong 3Q GDP numbers from Japan, don't expect USD/JPY to fall far from the 'pivotal area' around 90, says UniCredit. The bank says EUR/JPY "will suffer more spillover effects from a soft EUR/USD with the 130 area now a feasible target." EUR/JPY is at 89.47, EUR/JPY is at 134.03. Look for the USD's negative correlation with stocks to become even stronger this week, says UniCredit. "In a scenario that still swings between risk aversion and risk appetite, any USD pullback needs to be coupled with a sustained correction in US stocks to be persistent," the bank says.

Fed chairman Bernanke speaks on the U.S. economic outlook around 1715 GMT Monday, with Dallas Fed president Fisher talking on the same subject at 1815 GMT and Vice chairman Kohn speaks on challenges the Fed faces at 2315 GMT. UBS says recent Fed commentary has tended to sound dovish, with the general consensus being that exit policies are necessary, but not yet. The bank expects similar comments throughout tonight's speeches, which will keep the USD under pressure.

General Motors Co. will announce on Monday it plans to start repaying a $6.7 billion loan to the U.S. Treasury by year-end due to modest operating improvements, a source knowledgeable about the situation said."The reason GM is in a position to do that is that they have seen performance that has been modestly ahead of what the expectation was when GM went into bankruptcy and emerged from bankruptcy," said the person, who was not authorized to speak publicly about the repayment plan.

1-month ATM USD/JPY implied volatilities up at 11.20%/11.90% vs 10.85%/11.55% in NY Friday, as players bought options to adjust positions at start of week, while demand for USD downside hedges grows amid USD weakness. Options traders at major Tokyo banks say implied volatilities may decline toward 11.00% into weekend as markets may become subdued ahead of Japan's 3-day holiday (starting Saturday), denting demand for hedges. But trader says "there's a sense of caution" that the dollar may fall sharply on views that upcoming US data could show surprisingly weak figures. Focus now on retail sales due 1330 GMT, tomorrow's PPI, industrial production, Wednesday's CPI.

IMM commitment of traders report shows net JPY long non-commercial positions vs USD up to 21,878 contracts in week to November 10, vs 19,196 contracts in week earlier, showing investors' reluctance to buy USD amid expectations U.S. unlikely to rate hikes into next year. Focus now on series of U.S. October data to gauge developments in U.S. economy - retail sales due 1330 GMT, tomorrow's PPI, industrial production, Wednesday's CPI. Traders say USD/JPY may test downside, with fall to 88.00 possible in coming weeks, if any data much weaker than expected, adding to view U.S. recovery may be slower than previously expected; Dow Jones poll tips retail sales to rise 0.9% in October vs 1.5% contraction in September. USD/JPY last 89.56

EUR/USD, EUR/JPY off highs on profit taking by U.S. hedge funds, Japan players, shedding earlier pickup on stronger-than-expected Japan 3Q GDP, say traders at major Tokyo banks. "Selling by U.S. hedge funds is notable so far. They didn't pay much attention to the GDP data as they have already priced in a gradual pace of recovery," one says. Societe Generale head of FX Yuji Saito notes slight gains in EUR earlier came as "players bought (risk-sensitive) currencies on expectations that surprisingly strong figures in the GDP may lift share markets." But Nikkei last down 0.4%, denting demand for EUR. Tips EUR/JPY support at 132.80 vs last 133.75; EUR/USD support pegged at 1.4850 vs 1.4950. USD/JPY down in tandem with EUR/JPY, support at 89.00 vs last 89.44

Japan's government could agree as much as $30 billion (17.9 billion pounds) in new stimulus measures on Monday as economic growth is likely to slow next year due to sluggish personal spending and rising inventories.Economists doubt whether that amount will be enough to push up growth significantly as the Democratic Party-led government will fund the stimulus with money cut from a budget compiled by the previous administration.Japan's massive national debt means the Democrats don't have the leeway to spend much more.The economy grew 1.2 percent in the third quarter, nearly double the forecast and the fastest pace in more than two years, but that was partly due to stimulus that the previous government enacted. The better-than-expected headline figure also failed to mask signs of weakness in private consumption and factory output.