Talking Points:

Australian, NZ Dollars Advance on Swelling Risk Appetite as Stocks Push Higher in Asia
Quiet European, US Economic Data Docket Puts the Spotlight on “Fed-Speak” Calendar
US Dollar May Rise if Fed’s Dudley, Plosser Hint Fiscal Drag Won’t Delay QE Taper

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The Australian and New Zealand Dollars outperformed in overnight trade as Asian stocks advanced, pulling the sentiment-linked currencies along the way. The MSCI Asia Pacific regional benchmark index rose 1 percent in a move the news-wires attributed to China’s release of a detailed 60-point reform platform based on discussions at last week’s third CPC plenum.

The most notable items on the list included: creating more free trade zones, granting permission for private investors to set up small banks, an easing of the one-child policy, and a loosening of the “hukou” system (which eats away at disposable incomes by denying access to social services to migrant workers, forcing them to pay for them out of pocket).

A quiet economic calendar in European hours will see traders looking ahead to US event risk. While things remain quiet on the data front, the “fed-speak” schedule is noteworthy. Comments from New York and Philadelphia Fed Presidents Bill Dudley and Charles Plosser are due to cross the wires. The remarks will help set the tone for the release of minutes from October’s FOMC meeting on Wednesday. Traders will look to the minutes to gauge the central bank’s level of concern about the impact of the US government shutdown on economic growth, and thereby on QE “taper” timing.

Recalling the ultimately unfounded fears of fiscal retrenchment from the payroll tax hike and “sequester” spending cuts on US performance earlier this year, Ben Bernanke and company are unlikely to have been compelled to alter their baseline policy trajectory, at least absent concrete data arguing otherwise. Hints of such an outcome in Dudley and/or Plosser’s commentary may reinvigorate QE cutback speculation, driving the US Dollar higher against most of its top counterparts after prices settled at chart support.

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