AUSSIE TAKES A BOW

Unimpressive CPI numbers from Australia saw the Aussie take a bow against the US dollar during the Asian session. The numbers which were short of analyst expectations saw AUD/USD fall to 0.7736 losing 0.54%. The Reserve Bank of Australia (RBA) has remained dovish on the back of high household debt and low wage growth. Soft CPI numbers fuels the RBA's dovish stance. Hence, investor’s sentiment towards AUD/USD tilts towards the bearish side.

The US dollar remains firm as President Trump's tax plan looks on the way to meet a December deadline, Trump met with the Republican senators to discuss the proposed tax cut on Tuesday. The dollar traded flat against most of its other pairs during the Asian session, USD/JPY however dipped during the session. We suspect a bit of retracement might be taking place as the pair has been on a bullish ride for a while. Investors patiently await the president's choice of the Fed Chair given the effect this would have of monetary policy and the strength of the dollar. Most economists are of the view that monetary policy will be largely driven by the performance of the US economy. However, despite low inflation, odds of an interest rate hike in December stands at 96% according to CME FedWatch. Core durable goods and durable goods order are data to look out for from the US today.

The Japanese Yen fell against the dollar at the release of the country's manufacturing PMI. The index dropped to 52.5 from the prior month's 52.9 falling short of analyst forecast of 53.1. Though manufacturing seems to have slowed in October, it is the 14th straight month of expansionary reading. Prime Minister Shinzo Abe's election win will see the country continue with its economic stimulus until inflation gets to the Bank of Japan's (BoJ) 2% target. Bloomberg quoting unnamed sources noted that the BoJ intends to downgrade its inflation forecast in its quarterly report expected next week. From latest forecast, BoJ estimate core CPI to rise 1.1% for the fiscal year ending in March 2018. Y/Y CPI numbers are expected later this week.

Investors continue to stand on the sidelines watching the Euro in expectation of the ECB meeting in Thursday. Positive flash PMI numbers fuels the ECB's tapering plans as the Central Bank has maintained loose monetary policy to spur the economy of the Euro-area. Markit noted that "firms don't appear to have been unduly affected by recent euro strength, with growth of new export orders accelerating in October." And, "healthy demand in export markets appears to be outweighing any negative currency impacts." Investors expect the ECB to announce its reduction of asset purchase at its meeting on Thursday given the return to growth of EU economies. The Euro was mostly flat against the dollar during the Asian session.

The British Pounds experienced a bit of a sell down dropping to 1.3118 against the dollar in Tuesday's trading. GBP/USD was flat all through the Asian session. BoE Deputy Governor Jon Cunliffe warned that the economy has "clearly slowed" this year. That's due to "the squeeze we have seen on real incomes and imported inflation from the depreciation [sterling] that has come in. And pay has remained relatively subdued." He pointed out that interest rates "will not need to go up by as far and as fast as they did before the crisis". Still, "over the forecast period of three years rates will need to rise".

He however, emphasized that the exact timing of rate hike is "a more open question". Prelim q/q GDP numbers are expected later this morning, analyst have forecasted a 0.3% growth same as the prior period.

The Bank of Canada's monetary policy meeting comes up today. The Bank which has raised rates twice this year will most likely retain its current rates on the back of soft economic data. USD/CAD traded in favor of the USD during Tuesday's trade but stayed flat during the Asian session. A dovish monetary policy minutes will see the loonie fall against the dollar.

Kiwi Dollar remains in doldrums as investors are uncomfortable with the policies of the new coalition government. NZD/USD continues to trade low, now down to 0.6892. New Zealand's trade balance is expected later today. Positive economic news from the US will keep NZD/USD on a downward spiral as investor’s sentiment remains negative on NZD.

Gold prices have steadied this week, after the metal slipped 1.9 percent last week. Investor risk appetite increased feeding off positive employment, manufacturing and housing data from the US beating estimates. The Asian session saw a drop in the yellow metal to $1,274. Brent crude stood at $58.38 up 0.09% as at the time of writing.