Today, the final German CPI and the European Central Bank monthly bulletin will be published. We don’t expect any lasting impact on currency market trading. In the US, investors will keep a close eye on the jobless claims, especially after last week’s disappointing US payrolls release.
As is often the case with this data series, statistical issues might complicate the picture. There is maybe a slight asymmetrical risk. Looking at the recent price action, US bond markets and the dollar might be a bit more sensitive to a better than expected (lower) number than to a weaker report. Nevertheless, we don’t expect the release to change the broader picture.
On Wednesday, EUR/USD settled in the tight range close to the 1.32 mark after the sell-off late on Tuesday, which was extended early in Asian trading yesterday morning. EUR/USD temporary dipped to reach an intraday low in the 1.3180 area early in European dealings. However, the storm on core (in particular US) bond markets eased and European equity markets performed reasonably well. So, there was no reason to push for further dollar gains/euro losses.
The intra-EMU bond markets entered calmer waters, too (spreads narrowed marginally). The calendar of economic data only contained the German October industrial production data. The figure came out stronger than expected at 2.9% M/M and 11.7% Y/Y; but as was the case for the orders data on Tuesday, the impact on EUR/USD trading was limited. The US calendar was again very thin.
From a currency point of view, the key question was whether the rise in US bond yields would be extended and whether it would continue to support the dollar as was the case on Tuesday evening. US bond yields continued to drift higher in the run-up to the 10-year auction.
However the moves were less pronounced compared to Tuesday’s sell-off on the bond markets, providing no big impetus for USD trading in general and for EUR/USD in particular. So, EUR/USD continued to drift sideways (to slightly higher) also during the US trading hours. The cross rate closed an uneventful session almost unchanged at the session 1.3262 compared
to 1.3261 on Tuesday evening.