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London Session Recap

  • German Ifo business climate up from 107.4 to 109.3
  • Fed official Lockhart hints taper still a go in December
  • Canadian CPI and retail sales data on tap

The euro continued to strengthen against the U.S. dollar and the Japanese yen in today’s London session, as the shared currency received a boost from better than expected German Ifo business climate data. The index climbed from 107.4 to 109.3 for this month, reflecting stronger optimism in the industry.

Comdolls, however, were unable to recover from their selloff in the earlier trading sessions. AUD/USD tumbled below the .9200 mark while NZD/USD broke below .8200 when Fed official Lockhart hinted that tapering is still on the table for the December FOMC meeting.

Up ahead, we have data on Canada’s retail sales and inflation. Headline retail sales could show a 0.3% uptick while core retail sales are estimated to show a 0.2% increase. The CPI figure is expected to come in at 0.2% while the core version of the report could print a flat reading. Watch out for speeches from FOMC officials Tarullo and George in the next few hours if you’re trading dollar pairs.

Asian Session Recap

  • Nikkei posts 0.1% gain, USD/JPY testing 101.00
  • Australian bond yields spike to highest level since Nov 2011
  • German Ifo business climate to show small improvement to 107.9
  • ECB head Draghi scheduled for another testimony

Yen pairs pushed for more gains in today’s Asian trading session, as BOJ Governor Kuroda emphasized the central bank’s readiness to increase stimulus if necessary. Gains in the Nikkei also provided support for USD/JPY, which has surged to the 101.00 major psychological level.

Meanwhile, the Australian dollar and New Zealand dollar both underwent heavy selling pressure in the past few hours, as the Kiwi was bogged down by recent comments from RBNZ official McDermott while the Aussie was reportedly sold off by large hedge funds and institutions.

In the next few hours, we’ll see Germany’s final GDP reading for Q3 2013 and its Ifo business climate index, which is slated to climb from 107.4 to 107.9 this month. Stronger than expected data could keep the euro afloat, allowing EUR/USD to stay above the 1.3400 handle and EUR/JPY to extend its rallies. Do watch out for additional remarks from ECB Governor Draghi starting 10:30 am GMT, as he might attempt to manage market expectations on monetary policy.

U.S. Session Recap

  • RBNZ Asst. Gov McDermott says NZD is overvalued but intervention unlikely
  • IMF official thinks QE taper could be risky for emerging economies
  • ECB head Draghi says prospect of negative rates hasn’t been discussed
  • U.S. Philly Fed index weaker than expected at 6.5
  • U.S. manufacturing PMI up from 51.8 to 54.3

Central bankers were at it again during the recent U.S. trading session, as their comments regarding potential monetary policy changes (or lack thereof) sparked strong moves. In particular, RBNZ Assistant Governor McDermott’s remarks regarding the overvalued Kiwi dragged NZD/USD lower, although the pair bounced of .8200 support when he also said that intervention is unlikely. ECB Governor Draghi foiled euro bears’ plans when he clarified that the possibility of implementing negative deposit rates hasn’t been discussed during their latest policy meeting.

Meanwhile, IMF Deputy Managing Director Min Zhu was partly responsible for keeping risk-taking at bay when he spoke of the risks of tapering on emerging markets. However, he also pointed out that advanced nations are seeing promising signs of a recovery.

As for data, U.S. reports came in mixed, as the Philly Fed index disappointed while initial jobless claims and flash manufacturing PMI both printed better than expected results. The headline PPI figure came in line with the consensus of a 0.2% decline while core PPI was slightly better than expected at 0.2% versus the 0.1% estimate.

Earlier today, BOJ Governor Kuroda spoke in front of the Lower House committee and remarked that consumer inflation is on track to meet the 2% target by March 2016. Yen pairs continued to head north after he shared that he doesn’t think the yen is trading at an abnormally high level. There are no other major events lined up in today’s Asian session so it would be helpful to keep tabs on risk sentiment and on how Asian equity markets are faring to figure out how major pairs might behave.

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