EUR/USD has traded lower throughout the session on the back of dovish comments from ECB’s Draghi and positive US data during the session. Yesterday, Draghi said that the ECB stands ready to act, leading participants to believe that expansion to current monetary policy could be implemented at the December meeting. Today’s session saw several tier 1 data points out of the US. Firstly, ADP employment (182K vs. Exp. 180K, Prev. 200K, Rev. 190K) came in higher than expected ahead of the much anticipated non-farm payrolls report on Friday, which is expected to come in at 182K. Secondly, ISM manufacturing was also positive, (59.1 vs. Exp. 56.5 Prev. 56.9) printed the highest level of the year with the exception of July’s reading, which was the highest ever. Furthermore, towards the end of the session Fed Chair Yellen said that the FOMC thinks that it may be appropriate to move in December. As a result, EUR/USD broke the October low of 1.0897 and the August 5th low of 1.0847.
Elsewhere EUR/GBP also traded lower, with GBP seeing strength despite GBP/USD trending lower, as UK services and composite PMIs came in better than expected. EUR however, failed to benefit from largely better than expected composite and services PMIs from the likes of Italy, France and Spain. Instead EUR was weighed upon by dovish comments from Draghi overnight and from ECB’s Coeure and Constancio, who attended the ECB Forum in Frankfurt today. Notably for GBP, the risk event of the week comes tomorrow in the form of the BoE’s ‘Super Thursday’, in which participants await the rate decision, asset purchase target, quarterly inflation report and press conference by Governor Carney.
Finally, USD/JPY trended higher throughout the session as a result of the aforementioned stronger USD with interest rate differentials continuing to widen. Of note, minutes from the BoJ this evening are considered by many to be outdated, as they relate to the first of the two October meetings.
Looking ahead, tomorrow sees the BOE rate decision, release of EU retail sales data and comments from ECB’s Draghi and a host of Fed speakers. Also of note, tomorrow sees the release of the Norges Bank rate decision and following press conference by Governor Olsen.