Euro Struggles Continue Amid Dollar Pause and Europe Inflation Data
The dollar took a breather after recent sharp movements into key data releases. The euro remains under pressure, however, and is affecting currency crosses.
Despite the dollar's pause around 1.250 on EUR/USD, which tested close to the 1.2 figure support yesterday, the euro remains on the heavy side due to its ongoing struggles against other currencies.
The France-Germany spread has widened, with OAT-bund spreads outperforming bund gains, resulting in a euro that's weighed down by crosses even as it pauses around the mentioned level.
Profit-taking and short covering continue in the Swiss franc, which is still seen as a haven currency, driven by the shift from carry to risk avoidance. This has led to ongoing profit-taking/CHF short covering on strong runs, with EUR/CHF testing August lows and USD/CHF off 30 ticks.
Japan's inflation data also had an impact, with Tokyo September Core CPI YY coming in at 2.7%, vs market expectations of 1.8%. This adds weight to the case for BoJ tightening, leading to a modest reaction on USD/JPY, which is currently between 158 and 157 expiry levels.
European inflation data showed EZ CPI rising to 3.8% from 3.2%, broadly in line with expectations after strong national figures. Oil prices remain choppy, bouncing yesterday due to US military assets being sent to the Middle East but falling again today on discussed proposals for EU and IEA releases.
Focus now turns to payrolls next, while market development in France remains a key area of interest leading into and out of the weekend.