EUR/USD
The euro was broadly lower against the other major currencies on Tuesday as weak German industrial production data added to fears over the outlook for the euro zone economy. Production of new cars slumped by more than 25% month-over-month in August, the data showed. The report came one day after data showed that German factory orders fell 5.7% in August, fuelling fears that the euro area’s largest economy is falling into a recession. The euro gained ground against the dollar on Monday, recovering from two year lows as the greenback slid lower amid profit taking, following Friday’s rally on the back of robust U.S. employment data. Diverging monetary policy expectations have boosted the dollar against the euro in recent months, with the European Central Bank likely to stick to a looser monetary policy stance amid concerns over deteriorating inflation expectations and slowing growth.
GBP/USD
The pound held steady against the U.S. dollar on Friday, after the release of positive U.K. manufacturing data, while the greenback marked a pause from its recent rally but remained broadly supported. In a report, the U.K. Office for National Statistics said manufacturing production rose 0.1% in August, in line with expectations, after an increase of 0.3% in July. On a yearly basis, U.K. manufacturing production rose by 3.9% in August, exceeding expectations for a 3.4% gain. July's figure was revised to a 3.5% increase from a previously estimated 2.2% rise. The data came amid growing expectations that the Bank of England will leave rates on hold until next year. Meanwhile, demand for the dollar remained supported after data on Friday showed that the U.S. economy added 248,000 jobs in September, well ahead of forecasts for jobs growth of 215,000. The unemployment rate ticked down from 6.0% to 5.9%, the lowest level since July 2008.
USD/JPY
The Japanese yen was slightly weaker and the Australian dollar ups a tad ahead of central bank monetary policy reviews in both countries on Tuesday. The Bank of Japan and Reserve Bank of Australia are due to announce their policy decisions around the same time. Neither is expected to make any policy changes. At 1530 Tokyo time, BoJ Governor Haruhiko Kuroda hosts a regular post-meeting press conference. Also due is Japan’s August index of leading, coincident and lagging indicators due. The coincident composite index (CI), which reflects the current business conditions, is expected to post the first fall in two months in August. Chinese mainland markets remain closed. They are due to re-open on Oct 8.
