The labor market in the U.K. remains robust with the Claimant Count falling for the 11th consecutive month in August, this time by 4.2K. While positive this was a smaller drop than had been expected with forecasts centering on -8K. The decline in August has taken the total claimant count level to 852,900 which is the lowest level in 2 years. The Claimant Count Rate was released in line with forecasts at 2.6% while the ILO measurement of unemployed remained unchanged at 5.4% after seeing unemployed reduce by 28K.

Meanwhile the BOE Governor King has said that provision of extra liquidity by central banks could potentially undermine the pricing of risk, and is unlikely to bring down spreads in short term London Interbank Offer Rates.

He commented, “The current turmoil, which has at its heart the earlier under-pricing of risk, has disturbed the unusual serenity of recent years, but, managed properly, it should not threaten our long-term economic stability.” However, he did warn that the financial system is vulnerable to further shocks. He added, “If, in the wake of a shock to the financial system, the terms on which the financial system extends credit to the private sector become less favorable, then borrowing and overall demand would weaken.”

The Euro-zone Industrial Production sparked a surprise in July, rising by +0.6% MoM and +3.7% YoY. These compare to forecasts of +0.2% and +3.1% respectively. Firm gains were seen in capital goods, intermediate goods and non- durable consumer goods.

Bernanke was quoted in the Wall Street Journal as hinting towards a cut in interest rates. He noted that have started to rise in part because global investment is picking up and partly because lenders have become more risk averse. That aversion could be a factor favoring a cut in the Fed's target for short-term interest rates when its policy makers meet Tuesday.

Finally MBA Mortgage Applications saw a surprise bounce of +5.5% last week. The MBA's seasonally adjusted purchase index rose 5.2 percent to 448.0. The purchase index is considered a timely gauge of U.S. home sales. Nice to see but doesn’t alter the continued weakness in the housing market.

The Dollar was mixed in overnight trading, with the Euro making solid grounds to new historic highs at 1.3913 while the Dollar saw sideways ranging against the Swissie and Pound, the latter actually edging lower by the close. Dollar-Yen still remains underpinned following Abe’s resignation yesterday and it should now be too ling before the break out higher.

This divergence in Dollar weakness is beginning to display cracks in the downward momentum which is now showing a much stronger set of bullish divergences in short term charts. While there can be a little more to go against the Euro, the basic downward structure is looking tired and we should see a reversal in the Dollar’s fortunes as we go into the weekend and when short positions may well be cut.

More later when the analysis is complete.

The following economic releases are due today from Asia:

Australian September Consumer Inflation Expectation
Australian Q2 Dwelling Starts -0.5%

Japan August Tokyo Condominium Sales (YoY)

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