Euro Range Against Dollar, Firm Elsewhere Ahead Of ECB Meeting

While the common currency is still bounded in range against dollar, it's generally firm against other major currencies. Main focus today will be on ECB meeting. The ECB would very likely leave its policy rate unchanged at the October meeting. In fact, after the announcement of the OMT in September and release of the meeting statement, we expect policymakers would leave interest rates unchanged for the rest of the year unless economic data suggests that more downside risks would be seen on economic growth and inflation.

At the press conference, we expect President Draghi would need to give further clarification on operations of the OMT as well as Spain's sovereign debt problems. BoE will also announce monetary policy decision today. Interest rates will remain at 0.5%, and the asset purchase program at GBP 375b. The quantitative easing program is expected to be expanded once again after the latest GBP 50b program completes in November.

Another focus is Spain's debt auction. Spain is set to sell up to EUR 4b in 2014, 2015, 2017 bonds today. Spanish yield dived to as low as 5.63% in September and stayed range bound since then. A brief breach of 6% level was seen last week. But so far, even though, there are still much uncertainties on when Spain would request a sovereign bailout, yield managed to stay below 6% level so far.

To recap, Spanish prime minister Rajoy reiterated that bailout is not imminent earlier this week. IMF Managing Director Christine Lagarde told a newspaper that "if Spain wants it, we could help in diverse ways, for example by simply auditing and monitoring reforms negotiated with its European partners without the IMF participating in financing…But we could also play a role in financing."

FOMC minutes would also be scrutinized today. This minutes is particularly important as Fed announced the effectively unlimited QE3 program during the meeting. Markets perceived that as an important move towards adopting an explicit target for unemployment rate.

Some Fed officials advocated an unemployment rate between 5-6% would be needed before ending the stimulus program. And if would interesting to see how others think about the number. Economists are expecting more debate on the issue of unemployment rate and inflation numbers for the rest of the year. But the so called "Evans Rule" could be adopted as early as next year.

On the data front, Australia dollar somewhat stabilized mildly as building approvals beat expectation by rising 6.4% mom in August while retail sales missed and rose 0.2% mom. US will release challenger job cuts, initial jobless claims, factory orders. Canada will release Ivey PMI.