As has been the case for much of the past week, both the dollar and yen battled for the honour of weakest currency during Monday as they remained firmly out of favour in currency markets.
The yen was unsettled by a weaker than expected trade report as the seasonally-adjusted deficit increased to JPY1.09trn for September from JPY0.82trn the previous month as import demand remained very strong and export growth faltered. Bank of Japan Governor Kuroda maintained his commitment to a loose monetary policy which also undermined the yen and USD/JPY moved to challenge resistance above the 98 area.
The Euro was unable to make a fresh challenge on the 1.37 resistance area during European trading on Monday. There was an important sense of nervousness over underlying market positioning, especially as the influential CFTC speculative positioning data has not been published for three weeks.
The US existing home sales data edged down to an annualised selling rate of 5.29mn for September from 5.39mn the previous month, but there was still a solid 10.7% annual increase and there was also a gain in prices with an 11.7% annual increase which will help maintain underlying housing-sector confidence.
The overall market impact was limited, especially with market tensions ahead of the delayed payroll data on Tuesday. There has been a significant shift in interest-rate expectations with some speculation that any tapering of bond purchases by the Fed could be delayed until March. In this context, the underlying data reaction could be more subdued than usual. There was little enthusiasm for testing this assumption ahead of the data, especially as strong data could trigger another shift in rate expectations.
There was also a suspicion that the dollar was over-sold against European currencies, but no hard data to back this up. In this environment, two key features were very narrow ranges and the dollar’s inability to recover much of the ground lost last week. The dollar was unable to regain any significant resistance levels as EUR/USD held above 1.3650 in New York.
There was a robust reading for the UK Rightmove house-price index with a 2.8% monthly increase and an annual gain of 13.8% in the London area which will maintain central-bank unease surrounding housing-sector inflation, although the national picture is much more mixed.
GBP/USD was unsettled to some extent by the inability to hold above 1.62 on Friday and drifted to test support below 1.6150 before regaining ground on wider dollar vulnerability.