Dollar Rises Against Most Counterparts Monday

The dollar rose against most counterparts on Monday as risk appetite fell slightly on eurozone jitters following criticism of Greece's cost-cutting measures and continued Spanish reluctance to make an official request to activate the ECB's bond-purchase scheme. On the data front Consumer Credit came out considerably lower – at -3.28bn vs 9.2bn expected and 11.82 previous – however the dollar's reaction was muted.

Substantial Chinese data was released: Headline Inflation (Aug) rose 2 basis points to 2.0% from 1.8% in 2011, in line with expectations and mainly put down to rising food prices. Other data continued to show a possible soft-landing scenario with Industrial Production YTD in August falling to 10.1%; Producer Prices down -3.5%; Exports rising less than expected by 2.7% ; Imports falling by a similar degree and the Trade Surplus rising to 26.7bn, which was well above expectations of a fall to 19.5bn.

EUR
The euro pulled back a little on Greek concerns, after the Troika rejected 2bn of the 12bn of cost cutting put forward by the Greek government in exchange for the next tranche of bailout money, however, Finmin Venizelos assured that there were “alternative proposals.” Spanish yields slowly tracked higher maybe because the Spanish government still hadn't requested help from the ECB's and its new measures cannot be activated unless requested. Data was overall better-than-expected but failed to lift the single currency.

The eurozone Sentix Investor Sentiment Survey came out at -23.2 vs -30.5 vs -30.3 previous; French Industrial Production rose unexpectedly by 0.2% mom and Manufacturing rose by 0.9%; Italian GDP QoQ fell by -0.8% vs -0.7% previous and yoy by -2.6% vs -2.5% expected. Tomorrow could be volatile due to the Dutch General Election, in which anti-bailout parties lead, and the German Constitutional Court will pass judgement on the ESM – with most analysts believing it will accept it as legitimate.

GBP
The pound rose today as expectations of more easing in Europe and U.S led to weaknesses in the euro and the dollar versus the more stable pound. The ECB's announcement of its new monetary policy measure the OMT also supported sterling as it staved off euro-zone crisis fears. Given the U.K's strong trade links with Europe this also benefited the pound. Conversely, a slight fall-off in risk appetite on Greek fears may also have helped the pound in its role as European safe-haven.

As far as the outlook for the week goes the main events will on Tuesday when Germany will judge whether the ESM bailout fund is constitutional and the Dutch general election. On Thursday all eyes will be on the Fed to see whether The rate-meeting will announce more QE. From a purely data perspective, probably the most important release will be Wednesday's employment data, which is expected to see the unemployment rate unchanged at 8.0%.

JPY
The yen rose versus riskier currencies but fell against the dollar on Monday. Overnight data showed a slowdown in growth with 2nd quarter GDP revisions falling to 0.7% from 1.4% and QoQ to 0.2% versus 0.3% expected. The Trade Deficit (Jul) did not fall as deeply as expected, coming out at -373.6bn when -439.5bn had been estimated and 112.0bn had been the previous print.

The Current Account Surplus grew to 625.4bn vs 485.6bn expected; Consumer Confidence (Aug) rose higher than expected to 40.5 from 39.7 previous; Bankruptcies (Aug) dropped by -5.8% from -5.1% in the last print; Eco Watcher's Survey 'Current' fell to 43.6 when 43.4 was forecast and 'Outlook' fell to 43.6 vs 44.4 expected.