The US dollar regained ground against its peers when risk appetite tanked after the ECB statement. Data from the US came in better than expected, as the initial jobless claims showed a 259K figure versus the projected 266K reading while existing home sales beat expectations at 5.55M. Only the US flash manufacturing PMI is due today and a drop from 53.1 to 52.8 is eyed.
The euro suffered a sharp selloff across the board when ECB Governor Draghi admitted that they might increase their stimulus program soon. He noted the downside risks to growth and inflation, particularly the downturn in the emerging markets and the euro’s appreciation. He also clarified that they are looking into a range of other options, which suggests that more deposit rate cuts or bond purchases could be announced. Euro zone flash PMI readings are lined up today and weak data from the top two nations could spell more euro declines.
The pound was able to advance in recent trading sessions, thanks to upbeat UK retail sales data. The report showed a 1.9% jump in consumer spending, outpacing the projected 0.3% growth. Although the previous report suffered a downgrade, traders paid closer attention to the stronger than expected report for September. There are no reports due from the UK today.
The franc also suffered a sharp selloff, thanks to the downbeat ECB statement. Even though there were no reports out of Switzerland, the currency retreated as traders speculated that the SNB might intervene to keep the franc weak against the euro and its other forex rivals in case the ECB announces more QE or a rate cut. There are no reports due from Switzerland today but the franc might still take its cue from the euro.
The yen had a mixed performance as it reacted mostly to risk sentiment, gaining ground against the euro but losing to the dollar and pound. There have been no reports out of Japan yesterday while today saw a stronger than expected flash manufacturing PMI reading. The index climbed from 51.0 to 52.5 this month, outpacing the consensus at 50.6.
Commodity Currencies (AUD, NZD, CAD)
The comdolls managed to make a bit of a comeback, as expectations of additional easing from the ECB eased fears of a deeper global economic slowdown. Data from Canada came in mixed, with the core retail sales posting a flat reading and the headline figure indicating a stronger than expected 0.5% gain. Canada’s inflation figures are due today, with the headline CPI set to show a 0.1% drop and the core figure likely to show a 0.3% uptick.