BoJ Refrains from Expanding Easing

The preliminary third quarter GDP print showed the economy expanded at a 1.50% pace according to the advance estimate report released yesterday. The advance GDP price index for the quarter increased 1.20%, missing estimates of 1.50% and down from 2.10% from the second quarter. Although subject to revisions, the initial GDP estimates confirm that the US economy continued to experience moderate growth during the third quarter of the year before growth normalizes from the fourth quarter onwards. The modestly better GDP results saw the 10-Year US Treasury yields rise to 2.14%, posting a one-month high as the markets start to price in the probability for a December rate hike, which until yesterday seemed improbable. The equity markets however continued to tread higher, with the S&P 500 closing the session at 2084.

Preliminary estimates for Euro Area consumer inflation is due out during the European trading session with expectations that headline CPI saw a slight uptick to 0.10% while Core CPI remains unchanged at 0.90%. Inflation has been one of the biggest concerns for the ECB which sparked speculation that the Central Bank will review and adjust the existing asset purchase program and consider expansion during its December meeting, sending the Euro spiraling down to 1.0920. In the event that preliminary inflation estimates meet expectations, the markets would likely view it as a signal that the ECB could act at its December meeting. Yesterday, Germany's inflation reports showed a modest improvement with the headline CPI rising to a 0.30% annualized pace after staying flat just one month ago. EURUSD closed on a bullish note yesterday at 1.0985.