EurUsd After finding support just below 1.0900 against the dollar, the Euro was able to correct higher during the day with the US currency also vulnerable to some correction. There was speculation that month-end flows would tend to be negative for the dollar which triggered some caution over further buying after strong gains this week. German unemployment fell by 5,000 and the consumer inflation estimate was also slightly higher than expected as the annual rate was above zero due to base effects from last year. Spanish inflation remain well below zero and the euro-zone data will be watched closely on Friday as a weak figure would increase pressure on the ECB to relax monetary policy further. Headline advance US GDP for the third quarter was marginally weaker than expected at 1.5%, although consumer spending was firm and the data overall was close to expectations. There was a weaker than expected reading for pending home sales in this volatile series. Labour-market evidence remained robust with jobless claims only rising very slightly to 260,000 in the latest week from 259,000 previously and remaining close to 40-year lows which should bolster confidence within the Fed. Markets overall were still expecting a stronger dollar overall in response to the more hawkish than expected Fed statement and strong claims data. The Euro still moved to the 1.1000 area against the dollar as it corrected Wednesday’s losses and there was some expectation of month-end dollar selling with potentially choppy conditions.
Jpy The dollar was able to resist significant profit taking during Thursday as it held above 120.50 and challenged resistance above 121.00. The US currency was boosted by a further increase in bond yields as 10-year yields moved towards 2.20%. There was still caution ahead of the Bank of Japan policy meeting given divided expectations. The latest inflation data did not have a major impact with the core rate marginally higher than expected while there was a weak reading for household spending. The Bank of Japan left monetary policy on hold following the latest policy meeting. Although inflation has been pushed lower by energy prices, there was confidence that a tight labour market would push inflation higher. The yen initially strengthened sharply following the bank decision, but there was robust dollar buying support on dips below 120.50. The yen then weakened further as risk appetite improved following reports that the government is considering a supplementary budget. In choppy conditions, the dollar then faltered again above the 121.00 level
Gbp Sterling was unable to make further headway against the Euro on Thursday with support below the 0.7150 level. The US currency also found support at two-week lows below 1.5250 before a rally back above 1.5300. UK data releases were mixed as consumer lending remained strong in the latest monthly release and at the highest levels since 2007 while mortgage approvals were weaker than expected and there was also a decline in money supply. A weaker than expected reading for the CBI retail sales index which maintained some speculation that domestic demand was starting to fade. There was also a slightly weaker than expected reading for consumer confidence. There was further uncertainty surrounding Bank of England policy given diverse MPC opinions. There were expectations that the bank would take a more hawkish tone if the Fed raises rates in December. There was a warning from Standard & Poor’s that the UK could be subjected to a two-notch downgrade if it left the EU, but Sterling pushed to highs near 1.5350 on
Chf The Euro was confined to relatively narrow ranges on Thursday with further support below the 1.0850 level. The dollar was subjected to a correction after a run of nine daily gains with a retreat back below the 0.9900 level, although losses overall were measured. There was further speculation that the National Bank would look to take advantage of any opportunities to push the currency weaker and encourage market expectations of franc losses over the medium term. There will be some relief if there is a stronger than expected reading for the KOF confidence index.