Weak Data Weighs on Dollar Despite Better Outlook for Payrolls (page 2 of 2)

Higher money supply is typically seen as a sign of inflation, which means that King's comments were hawkish and confirms the market's overall belief that the central bank will be lifting interest rates to 5 percent later this year.

There is nothing on the UK economic calendar tomorrow aside from a speech by Deputy Governor Lomax. We are unlikely to hear anything new from her. The last time we heard from Lomax was mid last month. She took a slightly more dovish bent by saying that the economy was not roaring away and that certain economic activity indicators have ticked down. She did however say that the central bank was very alert to any sign of pay growth. The lack of data could lead to a retracement in the GBP/USD, as the currency pair is already beginning to show signs of exhaustion.

Japanese Yen - The Japanese Yen has not done much over the past 24 hours, but after an extended period of strength, it gave back a small portion of its gains today. There has been little reaction to North Korea's agreement to return to the nuclear negotiation table or the slide in oil prices. Perhaps the pair is reacting to the fact that new Prime Minister Abe wants to rewrite the country's constitution to allow Japan to have its own military. There is also no data due for out for the remainder of the week which means that the Yen will most likely be at the whim of the other currencies. There is a very large Treasury coupon payment due soon, which could be mildly positive for the Yen as investors repatriate their earnings.

Commodity Currencies (CAD, AUD, NZD) - The biggest market movers were the commodity currencies today with the Canadian dollar leading the pack. News that Canada will begin to tax income trusts has sent both the Canadian dollar and Canadian stocks significantly lower. Previously, these trusts have benefited from a tax loophole and the closing of this loophole will likely have a negative impact on corporate earnings.

This announcement came as a complete surprise which suggests that its impact on the markets could last a few more days. The Australian and New Zealand dollars despite the fact that Australian PMI dropped from 53.5 to 51.9 for the month of Oct. This was primarily due to employment retracing back to more reasonable levels after hitting 18 month highs and production weakening. Building approvals however were very strong; rising by 6.15 percent, highlighting the strength of the country's housing market. Tonight's retail sales and trade balance report should clear the air on how the Australian economy is doing. The Aussie has banked seven straight days of gains over the past 2 weeks. Should the numbers come out weak, expect profits to be taken.