Greenback strides on

An uninspiring day for equity markets yesterday saw many indices
close lower as risk aversion edged higher. Attention firmly remains
on events in Europe, with the Ecofin meeting today likely to see
further negotiations on a wide range of issues. So far there is no
advance concerning a Spanish bailout or next tranche of Greek loan
disbursement, with the latter only likely to be confirmed in
November. A visit by German Chancellor Merkel to Athens today is
not likely to result in any breakthroughs. US corporate earnings
will also garner greater attention as the week goes on, with Alcoa
set to begin the earnings season tomorrow.

The Greenback is being pounded by contradictory factors at
present. QE3 is likely to cap any gains in the currency but the
expansion of balance sheets by other central banks suggests that a
weaker USD outlook is by no means a certain conclusion.
Furthermore, from a growth perspective the USD comes out on top.
Even though US recovery is a weak one by historical standards the
economic outlook still looks better than in Europe, notwithstanding
the looming US fiscal cliff. Further, indication of recovery will
be judged from the release of the September small business optimism
survey today. A likely third straight gain will provide encouraging
news although the survey still remains lower than levels it was at
earlier in the year. Over coming days we could see the USD edge
higher as it capitalizes on the various strands of uncertainty in
the Eurozone.

In the UK today, we have the UK National Institute Economic
Social Research GDP estimate which arrives one month before the
official release. This figure is highly respected which can
influence monetary policy, as the meaning and consequences of the
report are very close to those for official GDP numbers. 
Elsewhere in the UK surveyors expect sales of homes in the UK to
improve thanks to the latest round of support for Mortgage lending
according to Royal Institution of Chartered Surveyors. They support
the view of the Bank of England that Funding for Lending scheme
could provide a timely boost to the UK market. The proportion of
surveyors expecting sales to rise in the next three months was at
its highest level since May 2010, the survey found. “Although we
would caution against reading too much into this, there are some
grounds for believing that activity could pick up over the coming
months,” Rics said.