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There is an unfamiliar shade of green across most order screens this morning, with risk appetite rebounding after equity markets were able to stall the disastrous week of declines yesterday; though the recovery in investor sentiment has not been uniform, as the overnight session was a struggle for the Nikkei and other Asian equity indices.   Stemming from the Bank of Japan’s inability to fill the quota of T-Bills they had intended to acquire, the Nikkei dropped 1.4%, while the Shanghai Comp slide by 0.65%.   It is unclear whether the first failure of the BoJ to secure the anticipated assets under their QE program is a function of investors not willing to unload their safe-haven assets due to market conditions, or merely the fact the central bank now runs the domestic bond market; either way, the failure does raise questions around the properly functioning mechanisms of ongoing QE in Japan.

Regardless, the greenback is churning through a consolidation phase as North American equity futures entice market participants back into the water, and though USDJPY has managed to vault north of the 106 handle, the Pound, Euro, and Commodity-Bloc currencies are all benefiting from the solid offer tone emitted from the USD.   The last few days have seen a glut of FOMC members hit the interview circuit, and not surprisingly, the overall tone has been of the dovish variety.

With global growth concerns stemming from a stagnant Europe and the potential for Ebola contagion in the US, we are starting to hear from regional Fed presidents that should growth in the US face greater headwinds than had been anticipated going into the second half of the year, the Fed has the ability to forego the last taper at the meeting later this month, or even look at instituting new purchases in 2015 in the event conditions worsen.

Janet Yellen will be speaking later today and it is likely she is questioned about the recent market correction and the Fed’s role is combating any external headwinds from soggy global growth, and we would assume it is likely Yellen remains cautious and displays her dovish feathers, reiterating asset purchases and the ongoing taper are not on a pre-set course and can be amended to reflect incoming economic data.   Effectively, the Fed still remains data dependent in regards to its monetary policy decisions, and with the dampening inflationary effects of a drop in oil prices, the Fed will be able to have some more breathing room in delaying their tightening cycle and keeping in place the so-called “Fed put.”

As we get set for the North American open, hydrocarbons are making a comeback as traders look to book profits on short positions after the YTD bottom, with buying interest in WTI and Brent bringing the benchmarks back to the mid-83s and mid-86s respectively.   Forecasts on oil prices from sell-side analysts have been revised drastically lower over the last week, a function of a slowdown in global growth and Saudi Arabia’s reluctance to cut output, though a better gauge on the temperature of the OPEC cartel will be known after next months’ meeting.   The Loonie was able to squeeze out some modest gains during the overnight session, but the pair was unable to put in much of a rally to correlate to the performance in equities and oil, as traders were intently focused on the CPI numbers that hit the wires earlier this morning.   Consumer prices for the Canadian economy over the month of September came in bang-on expectations, with the headline reading nudging down to 2.0%, while the core remained pinned at 2.1%.   There wasn’t much movement in USDCAD post CPI release, though equity futures are continuing to hold their strong gains after both housing starts and building permits in the US for September increased from the prior month.

More:  US Dollar Poised For More Losses