USD: Traded Mixed Throughout Day

The U.S. Dollar traded mixed throughout the day as a number of factors contributed to its fluctuations. One catalyst for its decline was the fact that Spanish Prime Minister Mariano Rajoy’s political party, known as the People’s Party, obtained a majority number of seats in the Galician Assembly, indicating support for the government’s austerity measures. The currency also rallied as industry reports showed that Japan’s exports fell the most since the March 2011 earthquake, raising speculation the Bank of Japan will increase stimuli. Trade remained light, as there were no major economic reports published. In Canada, the Loonie reached the lowest rate in over two months versus its U.S. counterpart, as market investors continue to assume the Bank of Canada won’t focus on raising the cost of borrowing money when it meets today to discuss monetary policy. The Canadian Dollar also rallied versus the remainder of its peers as statements issued last week by central bank Governor Mark Carney continued to weigh on the currency. Mr. Carney indicated that current economic forecasts show a slow down in recovery.

The Euro traded higher against the U.S. Dollar on renewed optimism that Spain is inching closer to requesting a bailout. The shared currency rallied for the first time in three days against the greenback after Rajoy’s People’s Party obtained 41 out of 75 seats in Galicia’s Regional Assembly, ensuring his austerity program will continue to receive support. This improved sentiment in the market as it means that Spain would not face obstacles when requesting financial aid. Analysts believe this may boost the Euro’s value even further. The British Pound climbed for the first time in three days versus the U.S. currency as official reports showed that the number of businesses declaring bankruptcy in the U.K. declined last month. This benefitted the Sterling as it improved the outlook for the British economy.

The Yen fell for the eighth day in a row versus the U.S. Dollar as a release confirmed that Japanese Exports declined the most since the earthquake of 2011. This also raised the possibility that the Bank of Japan will opt for further stimulus in order to bolster economic growth.

And in the South Pacific, the Australian Dollar slipped versus its U.S. counterpart in anticipation of a report, which is expected to reveal that inflation remained at the lowest level in 13 years, leaving room for the central bank to cut interest rates. The Aussie dipped lower after the country’s government announced it will reduce spending in order to obtain a Budget Surplus this fiscal year. The New Zealand Dollar gained against the greenback even as markets were closed for a national holiday.

EUR/USD- Spain May Not Face Obstacles

The Euro gained against the U.S. Dollar as Spain’s regional elections showed that the Prime Minister’s People’s Party won the majority of votes, suggesting that the majority of the country supports the government’s austerity measures. The party gained the majority in Mr. Rajoy’s home region of Galicia, removing any obstacles he may have had for requesting a bailout. This boosted optimism as it means that a request for bailout would unlock the ECB’s bond-purchasing program. On the data front, the Euro region’s Fiscal Deficit fell from 6.2 in 2010 to 4.1 percent of Gross Domestic Product last year; however, Public Debt rose.

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GBP/USD- Insolvencies Declined In September

The British Pound rallied against the U.S. Dollar after official data showed that insolvencies in the U.K.’s business sector declined in the month of September, fueling optimism that the nation’s economy is improving. According to the figures, Insolvencies dipped 3.1 percent from the year before. But the Sterling’s rally was dampened as investors anticipate the release of this week’s GDP data out of the U.K.

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USD/JPY- Exports Declined

The Yen fell for the eighth consecutive day versus the U.S. Dollar, sustaining the longest losing streak in seven years, as official reports revealed that Japan’s Exports plunged by 10.3 percent in September. According to the Finance Ministry, this caused the Trade Deficit to reach 558.6 billion Yen ($7 billion). This was the biggest drop since 2011 when a magnitude 9 earthquake devastated the northeastern part of the country. Investors look forward to October 20th when the Bank of Japan will announce its decision regarding monetary policy. The central bank is expected to increase stimuli as well as revise its economic projections for 2012 and 2013. Market investors have raised speculation the Yen will remain weak throughout the next few days.

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USD/CAD- Government Blocks Takeover

The Canadian Dollar traded at the lowest level in over 2 months against the U.S. currency amid speculation the central bank won’t focus its attention on reducing the interest rates when it meets today. The greenback rallied further against the Loonie after Canada’s government prevented an economy-sector takeover. According to sources, the Canadian government stopped the Malaysian state oil company, Petronas, from acquiring Canada’s Progress Energy with a bid of 5.18 billion CAD.

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Today’s Outlook

Today’s economic calendar shows that the U.K. will report on BBA Mortgage Approvals. Canada will release data on Retail Sales, Core Retail Sales and the Interest Rate Decision. The E.U. will announce Consumer Confidence. And Australia will publish Trimmed Mean CPI as well as CPI. The Bank of England’s Governor is expected to deliver a speech while China may report on HSBC Manufacturing PMI.