The dollar was able to secure a further boost late on Wednesday from the latest Federal Reserve minutes. There was certainly a mixed bag on offer from the Fed, but the rhetoric maintained the possibility of a December tapering which helped underpin the dollar as EUR/USD dipped to fresh lows below 1.3420.
Although the Bank of Japan left monetary policy unchanged at the latest policy meeting, the underlying expansionary stance continued to have a negative impact on the yen. The dollar also gained important support on yield grounds with US spreads over Japanese bonds at the widest for over two months. In this environment, USD/JPY pushed higher to a four-month peak above 101.
In his latest speech, Reserve Bank of Australia Governor Stevens continued to express his views that the Australian currency should be significantly weaker and there were also comments that intervention remained a possibility. AUD/USD remained on the defensive, especially with a weaker than expected Chinese PMI release, and retreated to two-month lows below 0.9250. USD/CAD also held a bullish tone with a move above 1.05.
The Euro was unsettled by much weaker than expected flash PMI data from France. Further damage to the Euro was avoided by a stronger than expected reading for Germany, but underlying concerns persisted. ECB President Draghi also remained very cautious surrounding the Euro-zone outlook in a speech on Thursday.
There were, however, also comments from Draghi that markets should not try to infer negative deposit rates. The remarks dampened speculation over negative rates triggered the previous day by ECB sources. In response, EUR/USD rallied sharply to the 1.3470 area.
The US data releases were mixed with a lower than expected figure for jobless claims and the strongest Markit PMI index for four months. In contrast, there was a disappointing Philly Fed index reading as it fell to 6.5 for November from 19.8 previously, although this is an erratic series. There was further choppy trading following the releases with EUR/USD again hitting resistance in the 1.3470 area.
There was a stronger than expected reading for the UK CBI industrial survey as the orders component increased to the strongest level since 2005. There was also an annual improvement in the government borrowing data with the deficit cut in part by higher tax receipts. The data helped maintain a near-term optimistic tone towards the UK growth outlook and GBP/USD was able to regain the 1.61 level.