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Trending Economic: Afternoon Brief [30 September 15]

Safe haven currencies have softened and Commodity bloc currencies have firmed today. But given the overall risk sentiments and weakening commodities outlook, we expect more weakness in the commodity bloc currencies.

In Europe, fears of deflation have been revived after preliminary Euro-area inflation rate for September came in a negative 0.1% compared to an expected zero.  Economic data out of Germany was also poor with retail sales for August m/m coming in at a negative 0.4%%, well below an expected 0.2%, followed by a rise in unemployment numbers by 2K compared to an expected reduction of 5K.  We expect EURUSD to come under pressure, especially if U.S. ADP employment change exceeds expectations, due to come in at 1215 GMT Today. Key FOMC speakers are also due to speak today: New York Fed President Dudley speaks on liquidity issues at 1230 GMT, followed by Fed Chair Yellen addressing banking community at 1900 GMT.

UK 2nd quarter current account deficit came in at a negative £ 16.5bn, above an expected 22.5bn fall. This is the lowest deficit in over 2 years, and with FDI and capital flows supporting the balance of payments and unemployment rate declining, we expect strength in GBP to return. BoE Governor Mark Carney abstained from making any reference on monetary policy in Tuesday’s speech.

Elsewhere Canada’s GDP m/m for July is expected to come in at 0.2%, any downside surprises will raise speculation over a possible rate cut by BoC in the next month meeting.