Euro Stays In Range On Spain Uncertainties

The euro continues to gyrate in familiar range as the situation on bailout of Spain remains uncertain. Reuters reported that the country is preparing to finally seek a sovereign bailout and "things will crystallize in November." However, Finance Minister Luis de Guindos reiterated on Saturday that it's in no hurry to seek a bailout as "there is much more optimism toward Spain than three or four months ago."

On the other hand, European Central Bank council member Josef Bonnici urged that even though urgency is a being less than before, it's "wise" for Spain to explore to route of bailout and "not wait until they're tested in the markets." The euro's recovery attempt late last week seems to have lost momentum already and will likely stay in the recent range for the early part of this week.

China CPI eased to 1.9% yoy in September, down fro 2.0% in August, as expected. PPI, only the other hand, unexpectedly dropped to -3.6% yoy. Xu Lianzhong, director of the Analysis and Prediction Office of the National Development and Reform Commission, predicted that the CPI was not likely to see a significant rebound in the remainder of the year. However, some analysts pointed to the fact that non-food inflation jumped to a seven-month high of 1.7% yoy, which was a sign of underlying price pressure and thus could tie the authority's hands on easing. Also, some pointed out that the weakness in PPI is a sign of weak economic activities.

Reported over the weekend, China's trade surplus widened to USD 27.67b in September, up from USD 26.7b in August. And that also surpassed consensus of $22.4b. Exports rose by 9.9% yoy to a record monthly level of USD 186.4b. Imports also rose 2.4% yoy. While the data was satisfactory, there were criticism that the export number could merely be a one-time blip. That's more of the results of a combination of factors, including the recent appreciation of the euro, coinciding of mid-autumn festival and the golden week. The reservation on the data could also be seen as the aussie, which is sensitive to China trades, couldn't rebound as the week opens.

Fed Chairman Bernanke defended Fed's QE as said "it is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies." Instead, Bernanke emphasized that Fed's open-ended QE3 "not only helps strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping support the global economy as well." However, the view was not totally shared by central bankers of emerging economies.

Russian finance minister, Anton Siluanov said that "for now, this excess liquidity is not contributing to inflation, but it could happen at some point". People's Bank of China head Zhou Xiaochuan also urged that Central banks "should consider draining excessive liquidity injected into the market and eliminate inflationary pressure in the long-term."

Latest CFTC data saw Euro net shorts built up again and rose to 72.3k contracts on October 9, up from a 50.3k contracts a week ago. Sterling net long was down to 22.57k contracts, comparing to 2012 high of 30.1k contracts a week ago. Yen net long was relatively unchanged in range at 12.9k contracts. Australian dollar net long dropped sharply for another week to 39.8k, that compares to 89.6k contracts two weeks ago. Canadian dollar net longs also dropped slightly to 95.6k contracts.

Elsewhere, UK rightmove house prices rose 3.5% mom in October. Australia home loans rose 1.8% in August. Japan industrial production was revised down to -1.6% mom in August. Swiss PPI will be featured in European session. From US, empire stat manufacturing index, retail sales and business inventories will be released.