U.S. Dollar Trading (USD) traders got mixed action yesterday with a rally in Europe reversed later in the US session. Most FX pairs were little changed with the risk sensitive currencies doing the best. The FOMC was a non event with rates kept at 0.25% and the language was not changed in the accompanying statement. China’s October HSBC Flash Manufacturing PMI sparked some buying with an increase to 49.1 a three month high and reversal of the recent slide in the survey. Looking ahead, Weekly Jobless Claims forecast at 370k vs. 388k previously. Also September Pending Home Sales forecast at 2.1% vs. -2.6% previously.
The Euro (EUR) rumors that Greece would receive a two year extension to achieve budget reforms from the Trioka was quickly refuted by the German FinMin who clarified no final decision has been made. ECB President Draghi was in Germany trying to convince the parliament of the merits of the recent OMT bond buying program. The EUR/USD was steady in the 1.2900 region waiting for fresh direction. The Sterling (GBP) GBP/USD reclaimed 1.6000 on the positive EU rumors and Chinese PMI news. The main drag recently has been speculation the BOE will increase its own QE program to help stimulate a faltering recovery but the Governor has suggested this is still undecided. GBP/JPY was the standout cross overnight reclaiming the Y128 and targeting the Y130 in the coming sessions. Looking ahead, September Private Loan EU forecast at -0.6% vs. -0.6%. Q3 UK GDP forecast at 0.6% vs. -0.4% previously.
The Japanese Yen (JPY) USD/JPY pulled back from Y80 but only 30 pips to Y79.70 with buyers still hoping to break above the big figure. Large orders are reported at the level with traders stops are above. Yen crosses are supporting and there has been a change in mood towards the Yen in the last week with the Japanese currency becoming the funding currency of choice. Australian Dollar (AUD) the Aussie was the strongest currency in the market with Q3 inflation ‘hot’ hampering the RBA rate cutting cycle. The Q3 CPI came in at 2.0% y/y much more than the 1.6% forecast. The AUD/USD broke above 1.0300 and grinded higher after the Chinese PMI showed the Chinese manufacturing outlook improving. Looking ahead, no economic data today.
Oil & Gold (XAU) the FOMC had little impact with no changes to policy so Gold remained pressured at the $1700 level. Buyers have defending the level so far but a break below would open up a move towards $1660. OIL/USD continued to slump falling back to $85 with traders searching for support.
Pairs to watch
EUR/USD Greece Aid to help rally?
USD/JPY Break or fail at Y80?