Themes

• General mood is “risk off”
• U.S. PPI higher than expected at 9.6% from 9.2% y/y talk
• Focus remains on tonight’s FOMC meeting

What’s Moving

U.S.PPI printed higher than expected, which again stoked inflation fears although the reaction was muted ahead of tonight’s FOMC meeting.

The FOMC is expected to be hawkish and increase their tapering. Tapering is how quickly the Fed will remove stimulus to the economy. It is widely expected that the stimulus needs to be completely removed before the Fed can raise U.S. interest rates.

Small Dollar buying was seen across the majors, with best gains seen against the CAD, which was also pressured by a weaker oil price.  Weaker gold prices added further pressure to commodity currencies (AUD, NZD and CAD). U.S. equities were weaker on the strong PPI numbers.

Thoughts

The reality is that no major movements are expected in Asia today ahead of tonight’s FOMC meeting. Light USD buying is expected to continue, but we shouldn’t see any range extensions.

Data in Asia today sees:

• Chinese Retail Sales (E: 4.8%)
• Chinese Industrial Production (E: 3.8%), and
• Chinese Unemployment (E: 4.8%)

Pivot Points