Fri 29th Oct: Dollar recoils after a brief show of strength as China hikes its rate

After a gap of nine years China raised its benchmark rates by 27 bps yesterday sending the greenback raising against the majors as this move was initially seen as weighing on the commodity currencies of Australia and Canada.
But once the market determined that this move would have no significant impact on the demand from China-a driver of the global economy of late- the majors bounced back and the dollar came back to its previous levels. Though the increase in interest rates by China was part of the measures for cooling off the economy, it was seen by the economists as a move to delay the adoption of a flexible exchange rate regime for its undervalued Yuan.
The market's understanding of the chinese rate hike and another fall in oil prices helped the Japanese currency to hold its ground against the dollar. Japanese economy is heavily dependent upon both oil imports and its exports to China.
Further comments from the ECB officials stating that "that no intervention to curb the euro's strength will be forthcoming unless market moves become more extreme" also lent support to the euro. The european economy is relieved by a rising euro which helps to reduce its oil bill.
Pound mirrored Euro's gains despite data showing a fall in its consumer confidence and nationwide housing price index.
On data front from the US the weekly jobless claims rose 20k to 350k but the event risk for the week should come today from the first estimates of the Q3 GDP scheduled for release today along with Michigan consumer sentiment numbers.