US Equities Lifted USD/JPY, Aussie Lower On Confidence

US equities edged higher overnight in thin holiday trading with DOW closing at another record high of 15,783.10. Investor continued to be optimistic that the strength of the US economy could withstand the impact of Fed's tapering of stimulus. Yen was under broad based pressure with USD/JPY taken out near term resistance at 99.40. But the weakness of yen is so far limited by mixed Asian markets. Market attentions are on China, which is set to unveil the 10 year reform plan today. There were speculations that the plan could underwhelm and the final outcome could be slightly negative to risk sentiments Data from Japan saw tertiary industry index dropped -0.2% mom in September.

The Aussie and Kiwi remained the weakest currencies so far. Data from Australia saw NAB business confidence dropped to 5 in October, down from prior month's 12. NAB chief economist noted that "overall confidence remains relatively higher than the well below-average levels over the previous three years." And, " low interest rates and improving asset market may still be helping." But "while employment conditions lifted to a one-year high, the index remained negative, implying further jobs shedding."

Released from UK, RICS house price balance improved to 57 in October. Inflation data will be a major focus in European session. UK CPI is expected to moderate back to 2.5% yoy in October with core CPI slowed to 2.0% yoy. PPI input and PPI output are expected to slowed in that month too while PPI output core is expected to be unchanged. Main focus for sterling will remain on the BoE inflation report to be released later in the week. The latest projection might show upward revision in growth and downward revision in inflation forecast. And most importantly, BoE might project unemployment to fall back to 7% threshold level earlier. And if that happens, Sterling would be given in lift, in particular against euro.