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The final October Euro-zone PMI manufacturing index was revised down to an 8-month low of 58.3 from the flash reading of 58.6 with a downgrading of the German index. The Spanish index missed market expectations, but the Italian reading was above consensus forecasts. The main feature was again severe supply shortages with delivery times for inputs increasing to the third highest reading on record. In this environment, there was sustained upward pressure on prices with input and output prices both increasing at the fastest pace on record. The data maintained concerns over underlying inflation pressures and headwinds to production.

The dollar was able to secure net gains into the New York open with a significant advance against the commodity currencies and the Euro edged back below 1.1600.

The US IBD consumer confidence index retreated to 43.9 for November from 46.8 previously which could be a significant element in restraining consumer spending.

There was, however, no significant impact with the dollar gaining ground later in the day.

The Federal Reserve will release its policy statement on Wednesday with strong expectations that the bond-purchase tapering plan will be announced formally. There was net dollar buying amid speculation that there would be a more hawkish overall tone due to increased inflation concerns. In this environment, the Euro retreated to lows around 1.1575 as commodity currencies retreated sharply. There were narrow ranges on Wednesday with uncertainty over Chair Powell’s rhetoric and markets also wary that a Fed tapering has been priced in. The dollar overall was little changed with the Euro just above 1.1580 ahead of the Fed statement.




Japanese Finance Minister Suzuki reiterated that specific monetary policy is up to the Bank of Japan to decide. There were no additional comments on currencies from the Minister, but with the assumption that he would welcome an element of yen weakness to help underpin export demand. A weaker currency would, however, also put upward pressure on imports costs which could damage competitiveness.

Markets continued to monitor US fiscal policy developments with the Democrats still trying to seek approval for the reconciliation package.

Wall Street equities posted net gains while the 10-year bond yield edged lower with subdued moves ahead of the Fed statement.

The dollar recovered ground amid wider support but was unable to break back above the 114.00 level. Markets will remain on alert for President Biden’s nomination of Fed officials and whether Powell will be backed for a second term or replaced by a more dovish candidate.

China’s Caixin PMI services index strengthened to a 3-month high of 53.8 from 53.4 and significantly above market expectations which provided some relief, although there were reservations surrounding increased coronavirus cases in China which will disrupt activity. Japanese markets were closed for a holiday on Wednesday.

Overall, the yen was resilient in Asia with the dollar around 113.80 against the Japanese currency and Euro just below 132.0.



Sterling attempted to stabilise ahead of Tuesday’s New York open, but was unable to make significant headway, especially with commodity currencies generally losing traction which also tended to have a negative impact on the UK currency even though equity markets held firm.

There were also further doubts whether the Bank of England would deliver a hawkish enough policy statement to underpin elevated market expectations. Uncertainty surrounding the actual central bank interest rate decision curbed activity and increased the risk of choppy trading.

Markets continued to monitor Brexit developments and the fishing dispute, although with no major developments as France held back from immediate retaliation.

The UK currency retreated to fresh 3-week lows near 1.3600 against the dollar while the Euro held just above the 0.8500 level. Sterling edged higher on Wednesday with a reluctance to engage in further selling ahead on Thursday’s Bank of England policy decision with the UK currency around 1.3630 against the dollar.



 Swiss consumer prices increased 0.3% for October compared with consensus forecasts of a 0.1% increase with the year-on-year increase at 1.2% from 0.9% previously. The higher inflation rate could lessen the potential for National Bank opposition to a stronger currency.

The franc overall lost some ground during the day with a reluctance to engage in long franc positions given the on-going threat of National Bank intervention to curb currency gains. The Euro strengthened to highs just above 1.0600 before fading while the dollar posted gains to 0.9150 before a retreat to 0.9135 on Wednesday.

Technical Levels 

Today's Calendar 



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