The main action in Asian trading on Thursday again surrounded the Australian dollar. The latest labour-market data was much weaker than expected with a headline decline in employment of over 20,000 for December. The market was in no mood to be forgiving and the currency took another caning with AUD/USD retreating to fresh four-year lows below 0.8780 before stabilising.
The pre-New York European session was generally uneventful with consolidation the main theme. The latest US consumer prices data was in line with expectations at 0.3% and the core data also matched expectations with a 0.1% monthly gain. The jobless claims data was slightly stronger than expected with a decline to 326,000 in the latest week from a revised 328,000 previously.
EUR/USD initially dipped following the US releases, but there was solid demand below the 1.36 level and the absence of follow-through Euro selling triggered a covering of short positions. There then followed a very choppy 90-minute spell of trading as EUR/USD initially built on momentum and a triggering of buy stops moved the pair to highs just short of the 1.3650 level.
San Francisco Fed President Williams stated that the Fed would adjust the rate of bond tapering based on the rate of improvement in the economy and this comment again suggested that quantitative easing could be phased out at a faster pace which would tend to underpin the dollar.
Subsequent US data releases were solid with the NAHB housing index at 56 for December from 57 previously while the Philadelphia Fed index edged higher to 9.4 for the month from a revised 6.4. EUR/USD also hit a wall of offers on approach to 1.3650 and retreated back to the 1.3600 area.
The dollar endured a more defensive tone against the yen with USD/JPY blocked ahead of the 105 resistance level and retreating to lows below 104.20 as both EUR/JPY and GBP/JPY were subjected to fresh selling pressure.
There was a slightly weaker than expected reading for the UK RICS house-price index with 56% of respondents seeing higher prices from 58% previously, although this was still close to multi-year years. The expectations component was also very strong which will maintain near-term optimism surrounding the housing outlook.
Sterling volatility was again a notable feature during the session with an initial GBP/USD slide to below 1.6320 reversed for a high above 1.6380. The pair then lost gains equally quickly as EUR/GBP found solid buying support and technical clarity remained lacking.