Sandy storm keeps uncertainty going

Hurricane Sandy continues to lash the east coast of America causing severe flooding and damages and leading to the decision to close the New York Stock Exchange for two consecutive days. Sandy storm keeps uncertainty goingThe full implications of the damage will be more evident at daybreak and the economic cost is poised to reach $20 billion.

The wise money markets have switched to a risk off mode as uncertainty prevails on the repercussions of Sandy and also with the US election swiftly approaching.

The US Dollar has gained across the FX markets in line with the risk off sentiment and this trend is widely expected to continue for the remainder of the week.

In other news the Bank of Japan has kept its overnight call rate unchanged, however it has expanded its asset purchase programme by Japanese Yen (JPY) 11 trillion; the asset purchase programme now totals JPY91 trillion.

The JPY has actually strengthened against the US Dollar on the news and against most of its major counterparts.

Demand for the Yen has increased with hurricane Sandy and the expansion of the programme has not led to a weaker Yen.

The BOJ would need to be much more aggressive to weaken the Yen and add some relief to the manufacturing sector.

Elsewhere Spain’s Q3 GDP came in marginally ahead of expectations at -0.3%.

Yesterday Spain’s PM Rajoy in a press conference ruled out an imminent request for a bailout which put pressure on the euro.

This morning’s slightly better GDP number will support his view that Spain does not yet require formal aid.

The Pound also slipped yesterday as the Bank of England deputy governor warned that Q4 could be weak after the upbeat Q3 data.

Momentum is now needed for the UK’s drive to recovery and future UK data snaps will come under the spotlight for signs of an on-going recovery.

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