Dollar Falls on the Prospect that Rising Oil Prices Could Hurt Holiday Spending (page 2 of 2)

Today, there were rumors that Spain's Iberdrola would be making a GBP12 billion bid for Scottish Power. The free market principles of the UK are fueling aggressive merger activity that otherwise would have gone to US who has suffered under the Sarbanes Oxley Act. The Bank of England is set to release the minutes from their latest monetary policy meeting tomorrow. The minutes are expected to reflect their tamer outlook on inflation and bullish outlook on growth.

Japanese Yen - The Japanese Yen is stronger today against the high carry currencies after Bank of Japan's Muto said that the timing of the next rate hike is "completely open," which includes the possibility of a rate move in December. Unlike the Japanese government, who were not supportive of tighter monetary policy or worried about carry trades, Muto said that he, which mostly likely means the central bank as a whole, is indeed watching carry trades.

Meanwhile the minutes from the central bank revealed nothing more than their continued plans to raise rates gradually. The problem however is the same one that we have been having for months now which is that Japanese government will do what they can to stop the central bank from moving forward. Just as Muto delivered hawkish comments, Japan's Economics Minister Ota said that he wanted to see the BoJ support continued economic growth through monetary policy which is basically an elegant way of saying that he wants to see rates remain low so that it could boost economic activity.

Commodity Currencies (CAD, AUD, NZD) - Commodity currencies are all stronger today as oil prices rise and gold prices remain firm. The move in oil prices and the rise in stocks, which hit a new record high, completely offset the sharp drop in retail sales and the smaller rise in leading indicators. Even though consumer spending fell in the month of September, the drop was primarily attributed to weaker auto sales.

Outside of the auto sector, sales actually increased. In fact, the main source of growth in the leading indicator report for the month of October was consumer spending. Canada is expected to release consumer prices tomorrow while the markets are expecting the weekly crude inventory data. With the Canadian dollar beginning to show signs of a bottom, strength in either of those reports could fuel more meaningful gains for the currency.

As for the Australian and New Zealand dollars, only minor data was released. Australian new motor vehicle sales increased 2.9 percent in October after a 3.0 percent rise the prior month. The annualized pace of New Zealand credit card spending slowed from 9.2 to 8.9 percent, suggesting that retail sales could have been a tad softer in the month of October.