At 2:00:00 AM Germany August Retail Sales M/M (exo 0.5%, prev -0.1%) Germany August Retail Sales Y/Y (exp 0.8%, prev 0.9%) At 2:45:00 AM E-12 French Prelim September CPI M/M (exp 0.2%, prev 0.0%) E-12 French Prelim September CPI Y/Y (exp 1.5%, prev 1.9%) E-12 French Q2 GDP Q/Q (exp 0.3%, prev 0.3%) E-12 French Q2 GDP Y/Y n/f 2.3% E-12 French Prelim September HICP M/M (exp n/f, prev 0.0%) E-12 French Prelim September HICP Y/Y (exp 1.8%, prev 2.0%)
The dollar held onto overnight one-month highs against the majors as investors were confident US attacks on Afghanistan were successful. Large gains on Wall Street to pre-September 11 levels as well as better than expected weekly jobless claims also added to confidence in the dollar. The greenback held near overnight one-month highs near 90 cents against the euro and 121.55 yen, but eased back against the pound and Swiss franc.
The euro fell to a one-month low of 89.91 against the dollar following the European Central Bank's decision to keep rates unchanged at 3.75%. The sell-off in the single currency began in European trading after the release of Eurozone GDP, which came in unchanged at 0.1% for Q2 and 1.7% from a year earlier, showed no unanticipated decline and convinced dealers the ECB would not cut rates. In a statement after the decision, ECB President Duisenberg said the task of authorities is to restore confidence among consumers and markets, and thus a move now would undermine rather than restore confidence. Duisenberg explained the September 17 rate cut, which prompted a quick response, was exceptional but in line with strategy, and moreover if events repeat themselves, the ECB will be in close contact with Fed. In the meantime, barring new events, Duisenberg declared the ECB reached a monetary stance consistent with price stability and noted its continual monitoring of developments. EUR/USD now stands supported above the 90 cent figure.
GBP/USD felt the weight of losses in euro/dollar as well as rumored M&A flows. The pound added to its downtrend on Thursday after it broke below ascending channel support on Wednesday around 1.4550 and hit a one-month low of 1.4402. GBP/USD stopped short of 1.4400, the 38.2% Fibonacci retracement of the move from 1.37 to Monday's 8-1/2 month high of 1.4836, and cable has since rebounded to above the 1.4450 support level.
USD/CHF soared to a one-month high of of 1.6522 before easing back to support around 1.6450. Since Monday, investors liquidated their positions in the safe-haven currency due to the perceived success of US military retaliation in Afghanistan. The Swiss National Bank's commitment to lower interest rates to avoid an appreciation in the franc also perturbed investors as it halted its rise at 1.61 against the dollar. However, any renewed terrorist acts against the US will likely cause inflows to the Swiss currency to resume. Support holds at 1.6380, 1.6310 and 1.6260. Resistance is seen at 1.6525, 1.6575 and 1.660.
USD/JPY maintained gains around its one-month high of 121.50. The dollar firmed slightly after comments from Japanese Finance Minister Shiokawa said he had told PM Koizumi it might be better if the yen was slightly weaker than current levels around 120-121 to the dollar. The Bank of Japan also kept its monetary policy unchanged today as expected. The decision passed with a majority vote and didn't surprise traders who has expected the decision to keep its target volume of current account deposits steady around 6 trillion yen and leave the symbolic discount rate at 0.10%. Despite the obvious evidence of declining prices, the central bank's recent effort to pump more money into the banking system is not filtering through to increased business activity. Today's data showing bank lending in Japan fell for the 45th consecutive month in September although money supply grew, corroborates this view. Meanwhile, the BoJ has pledged to maintain the current quantitative easing policy until changes in consumer prices stabilize near zero