Dollar Soft After Beige Book, ECB Watched

Dollar stays soft after Fed's Beige Book showed mostly positive outlook for the US economy, but loss is limited. The economic report noted that "most districts indicated a modest or moderate pace of expansion". And, "outlooks were mostly positive, with growth expected to continue at a slight to moderate pace in several districts." Labor markets "remained tight"with wage growth steady at "modest levels". Some districts reported rising wage pressure for certain sectors. However, price growth was seen generally as "mild". The report provided little change to overall economic outlook, nor Fed's rate outlook. Fed fund futures are pricing in 65% chance of rate hike in December. Dollar index is consolidating in tight range of 97.5/98.1.

Canadian dollar pared back some gains after BoC governor Poloz said that the governing council "actively discussed the possibility of adding more monetary stimulus" to "speed up the return of the economy to full capacity". Poloz noted that while exports recovered from 2007/2009 period, recovery has "persistently lagged our forecasts". And downward revision to exports could lower GDP growth by 0.6% by the end of 2018. GDP is projected to grow 1.1% in 2016, down from prior projection of 1.3%. For 2017 and 2018, growth is projected to be 2.0%, down from prior estimate of 2.2% and 2.1% respectively. Earlier, BoC left interest rate unchanged at 0.50% as widely expected.

ECB rate decision is the main focus today and the central bank is widely expected to keep interest rate and the EUR 80b per month bond buying program unchanged. With the current asset purchase program set to end in March 2017, Euro has been quite volatility on rumors of what ECB would do after that. There have been talks of tapering. But the current consensus seems to be that ECB would extend the program till the end of 2017. And the central bank could announce the chance in its December meeting. Hence, attention will be on whether ECB president Mario Draghi would pave the way for December announcement of QE extension.

On the data front, Australia employment dropped -9.8k in September versus expectation of 15.2k growth. Unemployment rate dropped to 5.6%. NAB business confidence rose to 5 in Q3. Swiss trade balance, German PPI, Eurozone current account, UK retail sales will be released in European session. But main focus is on ECB rate decision and press conference. US will release jobless claims, Philly Fed survey, existing home sales and leading indicators.