In Europe, FX markets were dominated by softness in the EUR, seen in EUR/GBP which fell to its lowest level since July, while EUR/USD resides below the 1.0700 handle. Sentiment toward the EUR remained soft despite the German ZEW Survey expectations printing higher than analyst forecasts (10.4 vs. Exp. 6) yet failed to bolster EUR against any major currencies. Other data releases today had more pronounced impacts on FX markets, as GBP was bid on the back of the higher-than-expected UK CPI Core Y/Y (1.10% vs. Exp. 1.00%) with the majority of other UK inflation readings coming in line with expectations.
Overnight, AUD was in focus in the wake of the RBA’s November meeting minutes where the central bank remained optimistic in regards to the outlook for the economy, however still left the door open for further easing. Subsequently, AUD/USD broke above 0.7100, however, gains were not sustained as the USD was kept bid amid expectations that the Fed is on course to raise rates next month. Once European participants came to their desks the USD came off highs, and the pair retook the 0.7100 handle. Despite coming off record highs, the USD has remained relatively firm throughout the session with a US CPI reading (CPI Oct Y/Y 0.20% vs. Exp. 0.10% Prev. 0.00%) strong enough to maintain current forecasts of a December rate lift off by the Fed.
Tomorrow sees the minutes from the FOMC’s November meeting, which came before the last (+271K) Nonfarm payroll report. Although these minutes are somewhat outdated, the data has improved since then, so a hawkish tone from the minutes could have highlighted significance, as inflation and jobs data since the meeting took place would have reassured Fed members who were keen to see more positive data.
Looking ahead, tomorrow sees the release of US housing starts and building permit data, DoE crude oil inventories as well comments from ECB's Mersch, Lautenschlager, Fed's Kaplan, Dudley, Mester, Lockhart and BoE's Broadbent