Dollar: Beige Book Report Validates Need for Further Easing (page 2 of 2)

Most of these reports should surprise to the upside as the strength of the Euro fails to put a meaningful dent on the Eurozone economy. Meanwhile in Switzerland, the KoF leading indicator was also much stronger than expected, but that did not prevent the Swiss franc from falling against the Euro as renewed risk appetite sweeps the currency pair higher.

British Pound Rallies on BoE Comments
The British pound rallied against both the US dollar and Euro thanks to the strong demand for high yielding currencies and hawkish comments from Bank of England policymaker Sentence. Although many people believe that a rate cut by the BoE is a done deal, Sentance's comment that setting monetary policy in the months ahead will be a particularly challenging task suggests that the central bank has not made up its mind. Like his other counterparts, he was worried about the upside risk to inflation and the downside risk to growth. Unfortunately tomorrow's data will not give traders any new information on where the greater pressure lies since the market has already discounted a further deterioration in the housing market and Nationwide house prices and mortgage approvals are expected to confirm that.

Australian, New Zealand and Canadian dollars Unfazed by Weaker Commodity Prices
The Australian, New Zealand and Canadian dollars are stronger across the board despite a drop in commodity prices. With no economic data released other than mixed Australian reports, the primary driver of commodity price strength is risk appetite. The breakouts in the Australian and New Zealand are impressive and judging from the price action, we could see further gains. USDCAD however is still holding above Tuesday's low which means that there is a decent chance for a bounce. We have a lot of important Canadian economic data due out over the next 48 hours. Tomorrow we are expecting the current account and raw material prices both of which are directly impacted by the level of the Canadian dollar. We expect these numbers to be weaker which could trigger the bounce in USDCAD. New Zealand has money supply and business confidence due for release. Building permits dropped -4.3 percent, but the change from the prior month should not be significant enough to offset the strong retail sales and PPI numbers that we have seen in the past few weeks.