EUR / USD The Euro was able to find support in the 1.1000 region against the dollar on Monday and managed to hold a slightly firmer tone, although it was unable to break any significant resistance levels with an overall theme of consolidation. There was a slightly stronger than expected reading for the German IFO index at 108.2 from 108.5 previously and there was some relief that the VW scandal appeared not to have had a wider impact on the manufacturing sector. The Euro was still undermined by expectations of further ECB easing at the December meeting. There was a much weaker than expected reading for US new home sales at 468,000 in the latest month from a revised 529,000 previously which created some fresh concerns surrounding the US outlook, although the overall impact was limited. There will be no significant expectations that the Federal Reserve will raise interest rates at this week’s FOMC meeting which starts on Tuesday with the statement due on Wednesday. The statement will inevitably be watched very closely with markets assessing whether there is still the potential for a rate increase at December’s meeting. There were reports that the US borrowing authority would be extended until March 2017 which would ease immediate concerns surrounding the debt ceiling. Ranges remained narrow with the Euro again struggling to make headway, unsettled by some fresh concerns over the Greek bailout programme while dollar activity was stifled by Fed uncertainty.
JPY The dollar was unable to make any headway against the yen on Monday and briefly dipped to lows near 120.60 as US yields moved lower following the housing data. There was still solid buying support on dips as the US currency rallied back to the 121.00 area with further speculation that the Bank of Japan could ease monetary policy this week curbing yen support. Risk conditions were also still relatively cautious following the dovish ECB statement and Chinese interest-rate cut with concerns that the actions reflected increased concerns surrounding the growth outlook as Asian growth trends remained generally fragile with sliding trade volumes. Asian equity markets were weaker on Tuesday which provided some yen support and there were some geo-political tensions as a US destroyer sailed close to the disputed Spratly islands. The dollar dipped to lows just below 120.50 before finding support with the Euro finding support near 133.00.
GBP Sterling drifted slightly weaker on Monday as the Euro looked to regain the 0.7200 area while the UK currency held above 1.5300, but faltered around 1.5380 against the dollar as global trends remained a key influence. UK economic data was weaker than expected with BBA mortgage approvals declining to around 44,500 in October from 46,600 previously which could suggest some cooling in the housing sector. There was also further significant deterioration in the latest CBI industrial survey with the orders component weakening to -18 from -7 previously with the quarterly data registering the biggest decline for three years as export markets remained under pressure. There will be further concerns surrounding the industrial sector with a strong probability that there was a contraction for the third quarter as a whole. Markets are still expecting GDP growth of 0.6% when the preliminary data is released on Tuesday. There will, however, be renewed fears over a lack of economic balance and an overall slowdown which will create further major difficulties for the Bank of England in setting monetary policy
CHF The Euro was able to find support below 1.0800 against the franc on Monday and pushed to highs around 1.0870 as the dollar also moved to highs above 0.9830 which put it very close to 10-week highs with only a very limited correction from highs. There was further speculation that the National Bank had intervened to push the currency weaker, especially as the Euro was still generally vulnerable on the major crosses. Expectations of a loose global monetary policy also curbed immediate franc demand, although uncertainty surrounding growth prospects remained high.