USD strengthens versus EUR and GBP
The dollar has managed to claw back some ground versus the euro, with the single currency struggling to hold a break through the $1.40 level. There were reports that automatic sell orders were also pulling the euro back towards $1.38. Speculative traders are believed to have become short dollars following the recent sell off, which could leave them cautious about selling it too aggressively from here, given that there is a risk that the Fed may not deliver on the policy front.
Overall, however, dollar sentiment remains bearish, with the USD losing further ground versus the yen overnight despite wariness about the prospect of further intervention from the Bank of Japan. Indeed, traders are speculating that a test of Y80 now seems inevitable as the USD/JPY rate continues to hit fresh 15 year lows. Data released overnight showing that Japanese consumer confidence fell for the third month running in September appeared to have little impact on the yen as the focus remains clearly on the outlook for the US. Markets will be paying close attention to this evening’s release of the minutes of the September FOMC meeting, which may provide some policy updates.
It is a busy day in terms of UK numbers. Overnight the BRC retail sales survey for September disappointed somewhat, showing sales growth slowing, led by a drop in the demand for big ticket items. Meanwhile, the BCC quarterly trends survey showed the economy slowing sharply in Q3, with the RICS housing survey also disappointing. Other data due over the day include the CPI report for September, as well as Augusts’ trade numbers. Ahead of the releases sterling remains pressured versus the euro by the prospect of further action from the Bank of England.
It’s a fairly quiet for data in the US this afternoon, though the NFIB small business survey is interesting to gauge whether credit is flowing any better to this sector. This evening, the release of the FOMC minutes will be key. With the market now widely expecting more QE from the Fed as early as November, the minutes may reveal more of the FOMC thinking about the size and the timing of that.