USD saw strength throughout the session, bolstered by month and quarter end flows, an up-tick in sentiment and a better than expected ADP employment change report (200K vs. Exp. 190K), the highest level since June. As such, USD gained against notable counterparts, with EUR/USD finishing the European session near lows.
In conjunction with USD strength, JPY weakness was observed. This began overnight as sentiment appeared more ‘risk-on’, which saw safe haven flows leaving the currency. JPY weakness was further exacerbated by Japanese industrial production missing expectations (M/M -0.50% vs. Exp. 1.00%). This prompted JP Morgan to comment that the country is probably already in recession and forecast that the BoJ would expand its monetary policy on October 30th, or possibly even October 7th, the next scheduled BoJ meeting. As a result USD/JPY traded higher throughout the session, above the 120.00 handle.
Commodity currencies have been boosted on the back of strength in the energy sector which pared some losses early in the day after yesterday’s weakness on the back of API crude oil inventories showed a build of 4600k. CAD also saw strength after Canadian GDP printed better than expected (M/M 0.3% vs. 0.2%). Notably NZD also saw strength today, as Westland Milk lifted their 2016 forecast pay out and said they see some signs of increasing demand and price recovery.
Finally EUR/GBP underperformed amid touted month and quarter buying as well as a large EU farm subsidy paid to UK farmers, with the currency cross breaking the 0.7400 handle to the downside. Today saw the release of German employment and Eurozone CPI, both printing lower than expected and the former showing the Eurozone in deflationary territory.
Looking ahead, tomorrow sees BoJ's Tankan report, Caixin China PMI, French, German, UK, Eurozone and US Manufacturing PMI's, US weekly jobs data, comments from Fed's Brainard and Williams and ECB's Draghi, Jazbec and Honohan.