Market Drivers for November 15, 2013
USD/JPY continues to climb with 100.50 in view
EZ CPI in line
Nikkei 1.95% Europe -.20%
Oil $93/bbl
Gold $1283/oz.

Europe and Asia:
EZ CPI 0.7% vs. 0.7%

North America:
USD Empire 8:30
USD IP 9:15
USD Business Invetories 10:00

It’s been a incredibly quiet trading session for the last day of the week with most major currency pairs stuck in very narrow ranges amidst absence of any fresh marco economic news. The economic calendar is nearly barren today with only EZ CPI and a smattering of second tier data out of the US for markets to absorb.

The only clear trend in today’s trade was the continued strength in USD/JPY which inched higher towards the 100.50 level on the back of another strong rally in the Nikkei. Despite the decidedly dovish stance of Fed Chairman nominee Janet Yellen and the decline in US 10 year rates, USD/JPY has shown surprising strength this week as it once again begins to trade on risk flows.

One of the effects of Ms. Yellen’s continued support of QE has been the rally in global equities, especially the Nikkei, as stock traders responded positively to her continued support of liquidity provisions. As the Nikkei climbed, so has USD/JPY with the pair now comfortably perched above the 100.00 level for the first time since September.

Elsewhere in EZ the CPI data printed in line at 0.7% as expected falling to its lowest level in 4 years. The EZ continues to flirt with the prospect of deflation, but Germans remain adamantly opposed to any further monetary stimulus or mutualization of the regions debt and for that reason ECB policy remains constrained for the time being.

Next week’s EZ flash PMI data could prove crucial to how ECB policymakers structure their policy over the near term. If the data continues to show a decline in economic activity the pressure on ECB to do more – including the possibility of negative deposit rates – will grow markedly and EUR/USD could once again head towards the 1.3300 level.

For now however, the pair appears to have strong support at 1.3400 and continues to see a mild benefit from capital flows and positive risk appetite. If US equities extend their gains into the weekend they could help lift USD/JPY through the key 100.50 barrier and may push EUR/USD towards 1.3500 as the day proceeds.

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