USD pared some of last week’s gains to spend the session in the red, benefiting commodity currencies as well as JPY ahead of Friday’s BoJ decision
JPY saw strength throughout the session with USD/JPY breaking below the 121.00 handle, helped by the weaker USD. JPY also benefitted from comments from PM advisor Hamada, who suggested that the BoJ can refrain from further easing at this stage, with these comments in line with suggestions on Friday from advisor Honda. As a consequence, expectations for the BoJ to expand monetary policy at their meeting later this week have been dampened. Separately, softness has been observed in the USD index, with the greenback spending the European session in the red to pare some of last week’s ECB inspired gains, whilst being further weighed on by lower than expected housing data (US New Home Sales -11.50% vs. Exp. -0.60%).
Weakness in USD also benefited commodity currencies, with the likes of AUD and CAD bolstered by initial strength in the likes of WTI and Brent, and while the energy complex came off its highs after the NYMEX pit open, the commodity currencies were able to hold onto their gains. EUR/USD also spent much of the day in positive territory on the back of USD weakness, while also seeing sentiment bolstered by the latest German IFO report, which showed a mixed reading (Business Climate M/M 108.2 vs. Exp. 107.8, Current Assessment M/M 112.6 vs. Exp. 113.5) but crucially was unfazed by the Volkswagen (DE:VOWG) emissions scandal, according to IFO economists.
Looking ahead to tomorrow, the notable highlight from Europe comes in the form of the advanced reading of UK Q3 GDP, while the US sees durable goods orders, S&P/Case Shiller report, services PMI and API crude oil inventories, while the speaker slate sees both BoE’s Shafik and ECB’s Coeure.