Key News

• Banks round the world have still to reveal about half of their likely losses resulting from the financial and economic crisis. (Financial Times)
• German unemployment rose in September. (Bloomberg)
• South African credit growth slumped to its lowest in almost 43 years in August. (Bloomberg)
• Australian retail sales, approvals to build private homes and bank mortgage lending jumped in August. (Bloomberg)
• China's manufacturing expanded in September for a sixth month and employment rose at its fastest rate in two years. (AP)

Quotable

“Anything in any way beautiful derives its beauty from itself and asks nothing beyond itself. Praise is no part of it, for nothing is made worse or better by praise.”

                             Marcus Aurelius

FX Trading - Warm up for Friday...
There have been much cryptic and not so cryptic comments of late from Federal Reserve Bank speakers. Some are implicitly calling for rate hikes sooner rather than later to mop up all the mess of money excess, others explicitly saying the Fed will likely surprise on the aggressiveness of future hikes…but the market doesn’t seem too concerned about that today, as the dollar is back under pressure this morning and trading lower against all the majors. I guess it was time for the dollar to take a breather, as it strung together a two-day rally. Two-day rallies are rare for Mr. Greenie these days.

Aussie has surged to fresh post-crisis high against the buck on more good economic news from down under. China continues to keep the music playing with another month of officially reported increase in manufacturing activity and rising employment—just in time for their big Beijing bash on Thursday for the party faithful. But keeping the music playing has caused concerns, as overcapacity in China is rampant, especially in the steel industry.

“The State Council, China’s cabinet, said in a strongly worded statement that highly polluting sectors including steel, coke, cement and plate glass must cut capacity, while silicon and wind power producers should pursue more orderly development,” the Financial Times reported.

Though this story doesn’t play into the traders view when it comes to currencies, it might be very important for “investors” in the currency market, assuming there is such a beast left. Why important? It’s important because Beijing is betting a lot of chips on the proverbial V-shaped recovery.

What if China has it exactly right and the US consumer rebounds in a big way? Well, it might mean the market starts taking Fed speakers seriously. That might throw quite a monkey wrench into the idea of the US dollar as the key carry-trade currency, something traders now seem to be feasting upon.

It has been those better than expect non-farm payroll days that have juiced both stocks and the dollar on the same day. We will likely find that out on Friday on the release of US non-farm payrolls report for September. But today we get a look at Friday’s warm-up act in the form of the ADP Employment Report [the ADP Employment Report defined].

ADP Employment Report thru August 2009

So, given the run against the dollar today, just maybe the ADP report will mean something. A good report and bad price action in the buck could tell us something. Stay tuned.