Dollar stays firm against Euro but pares back some gains against other major currencies as focus turns to FOMC minutes. At the meeting on September 21, 3 of 10 voters dissented the decision to keep federal funds rate at 0.25-0.50%. Those include Kansas City Fed Esther George, Boston Fed Eric Rosengren and Cleveland Fed Loretta Mester. The vote showed that hawks in FOMC could be starting to gain momentum and markets will be looking for further evidence of that. Also important is whether the general tone of doves has softened. And the discussion would give markets a sense on the how firm FOMC is to raise interest rate in December. Currently, Fed fund futures are pricing in nearly 75 chance of a December move. Dollar index and treasury yield extend near term rise this week. Dollar index reached as high as 97.75 and breached key near term resistance at 97.56. 10 year yield also reached as high as 1.781 and breached 1.752 resistance.
In UK, newly appointed BoE MPC member Michael Saunders said that there will be "an inflationary effect coming through in the next two-to-three years from the drop in the pound". Import prices could "rise perhaps 12-13 percent". Also, "given the scale and persistence of the UK's current account deficit, I would not be surprised if sterling falls further". However, Brexit is a "bumpy" process with impacts of growth. And hence, "if such a scenario were to materialise then, provided inflation expectations and pay growth remain well-contained, I would expect the MPC (Monetary Policy Committee) to largely look through any such direct effects on inflation of sterling weakness, even if they extend for several years."
In Japan, BoJ governor Haruhiko Kuroda reiterated that "we are prepared to ease policy again, including lowering short-term rates, if we judge that the merits outweigh the costs." Meanwhile, BoJ would maintain the current pace of asset purchase under that new framework of "yield curve control". BoJ board member Yutaka Harada said that "Japan is quite distant from reaching the limits of monetary easing." And, Harada also noted that "under current circumstances, I don't think negative rates would hurt bank profits enough to have an adverse impact on the economy."
On the data front, Australia Westpac consumer sentiment rose 1.1% in October. Japan machine orders dropped -2.2% mom in August. Eurozone will release industrial production while Swiss will release ZEW expectation in European session. Main focus will be on FOMC minutes.