USD weakened as dampened sentiment dominated the session as more disappointing data out of China continued to be a cause of concern for participants. Chinese CPI missed expectations (1.60% vs. Exp. 1.80%) showing a drawdown for the 4th consecutive month, while PPI (-5.90% vs. Exp. -5.90%) printed a 43rd consecutive negative reading. Consequently USD opened the session in the red, equities were weighed upon and an uptick was observed in fixed income. An advanced reading of retail sales and PPI data out of the US only exacerbated USD weakness. Advanced retail sales missed expectations (M/M 0.10% vs. Exp. 0.20% prev. 0.20%, Rev. 0.00%), showing a decrease in 7 of the 13 major categories, while PPI (M/M -0.50% vs. Exp. -0.20% Prev. 0.00%) showed the biggest fall since January.
GBP/USD was the pair that benefited most from USD weakness, as GBP saw strength after a well-received employment report early in the session, which showed the highest levels of employment in the UK since records began in 1971. Some desks also attributed GBP strength to the recently announced M&A deal between SAB Miller (L:SAB) and AB Inbev (N:BUD), which is valued at GBP 68bln. GBP/USD continued to outperform in FX markets, breaking above its 50 DMA and remaining near highs towards the end of the session.
Antipodean currencies also benefitted from a weaker USD today. NZD/USD gaining traction, trading at its highest level since late July. This came after New Zealand revealed a surprise budget surplus for 2015. AUD also gained ground due to weakness in USD, in spite of speculation that the RBA may need to expand monetary policy, after Westpac increased mortgage rates by 20bps.