This morning the currency markets had a chance to cool off from yesterday’s volatile affair although sterling was gradually strengthening across both major pairs. Cable broke the psychological barrier of 1.55 following on from the dovish comments from the fed last night and the seemingly ruled out rate hike for October and possibly December.
This afternoon the dollar came back fighting as the US data was strong. Initial jobless claims were expected at 270k came in at 255k, continuing claims also reduced from 2200k to 2158k for the month, both figures highlighting comments from the fed of the jobs market tightening. US CPI year on year for September came in better and stepped out of deflation to a flat 0% with the core figure also accelerating to 1.9%. As a result of these positive job figures and inflation figures, the dollar is continuing to gain back some of its losses from yesterday.
ECB governing council member Nowotny said when commenting on the QE program from the ECB that ‘it’s quite obvious that additional sets of instruments are necessary’. This has extended the notion that the ECB will increase QE at next week’s meeting. These comments have led to a general euro weakening and sell off.