Dollar remains the strongest major currency this week and stays firm in Asian session. Much support is provided by recent surge in treasury yields. 10 year yield rose 0.033 overnight to close at 1.713 after hitting as high as 1.730. That's putting recent high at 1.752 back into radar. The greenback is also lifted by a chorus of hawkish fedspeaks this week. Richmond Fed president Jeffrey Lacker said yesterday that "there are signs that inflation is heating up." And he said earlier this week that "pre-emptive increases in the federal funds rate are likely to play a critical role in maintaining the stability of inflation and inflation expectations." Economic data from US have been positive so far with ISM manufacturing climbed to 51.5 and ISM non-manufacturing surged to 57.1. The focus will be turned to tomorrow's non-farm payroll report.
Nonetheless, Fed vice chair Stanley Fischer warned yesterday that the US "could be stuck in a new longer-run equilibrium characterized by sluggish growth." And, "ultralow interest rates may reflect more than just cyclical forces," but "be yet another indication that the economy's growth potential may have dimmed considerably." But he also noted that "ultralow interest rates are not necessarily here to stay, especially if the right policies are put in place to address as least some of their root causes." "Some combination of improved public infrastructure, better education, more encouragement for private investment and more effective regulation is likely to promote faster growth."
In Europe, German Chancellor Angela Merkel sounded tough with her stance on Brexit. She emphasized there is no exception to EU's four freedoms, which include free movement of people, goods capital and services. And, any deviation would represent "a systematic challenge for the entire European Union". And, "full access to the single market is coupled, and inseparably linked, to acceptance of the four fundamental freedoms, and they include free movement of people." UK prime minister Theresa May said earlier this week that she will trigger the Article 50 for Brexit by March 2017. And it's believed that May would opt for a so called "hard-exit:".
On the data front, Australia trade deficit narrowed to AUD -2.01b in August. German factory orders rose 1.0% mom in August. Swiss CPI dropped to -0.2% yoy in September. Eurozone retail PMI, US Challenger job cuts, jobless claims and Canada building permits will be released later today.