The broader market tone was showing signs of improvement in the European session and early in the US session, with a bit of risk appetite returning after a shaky start in early Asian trading. Asian stocks opened the week with another wave of sell-offs as China set the mood. However, a stabilization in European and US stocks helped support risk.
The improvement in risk appetite led to some safe haven selling, including the yen. The dollar made a significant recovery from the 116.68 yen low this morning to climb back above 117 yen and briefly tested 118.00.
Sterling hit a fresh 5 ½ year low versus the dollar early in Asia at 1.4493 but made modest gains throughout European trading to reach a session high of 1.4603. Upcoming risk for the pound lies with the Bank of England meeting on Thursday, although most expectations are for the central bank to keep policy unchanged.
The euro retreated to fall back below 1.09 against the dollar. There was little impact from the release of the Eurozone Sentix index which deteriorated more-than-expected in January as an economic slowdown in China affected investor confidence.
US WTI crude oil was down 55 cents at $32.62 a barrel, the lowest since 2004. The oil-linked Canadian dollar has been hurt and as a result reached eleven-year lows early in Asian today. USDCAD hit a high of 1.4187 before easing slightly.
US data today only consisted of the Labor Market Conditions Index which improved in December but had little impact on the greenback. There are no data releases for the rest of the US session but focus would be on two Fed speakers—Dennis Lockhart (Atlanta Fed President) and Robert Kaplan (Dallas Fed President). Investors will look to see how hawkish or dovish their remarks will be but it is important to note that neither is a voting member of the Fed policymaking committee for 2016.
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