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    European Session – ECB, BoE drive euro, pound lower, FOMC minutes in focus

    Central banks were in focus today, beginning with the Bank of England policy meeting, the European Central Bank’s “account” of the last policy meeting and finally the FOMC minutes later.

    The euro was strong in the early part of the European session against the dollar and rose above the key 1.13 level for the first time in a week. A session high of 1.1314 was reached even though data showed Germany’s trade surplus narrowed sharply in August to 19.6 billion euros.

    The single currency soon faded all of the session’s gains and slipped down to 1.1237. Weakness was driven by the release of the ECB’s September 2-3 policy meeting minutes. These expressed concerns of risks to the Eurozone economy from a slowdown in emerging markets led by China. The ECB’s Chief Economist Peter Praet speaking today also mentioned downside risks to Eurozone.

    Sterling rallied to a high of 1.5371 before tumbling to 1.5260 following the Bank of England monetary policy announcement. As expected, the BoE left policy settings unchanged this month but the minutes suggested that the near-term outlook for inflation was a little softer. Concerns were expressed on the dampening effect of the strong pound on inflation.

    Focus now turns to BoE Governor Mark Carney’s speech later. He is due to participate in a panel discussion about the global economy at the International Monetary Fund meeting in Lima, Peru.

    Data from the US today included initial jobless claims, which declined to lowest level since mid-July. In the week ending October 3rd, claims fell by 13,000 to 263,000. A survey showed 274,000 claims were expected. Meanwhile, the prior week’s reading was revised to 276,000 from an initially reported 277,000 claims.

    The dollar briefly rose after the data to reach a session high of 119.97 yen before steadying. Earlier in the day it fell to as low as 119.61 yen. Focus now turns to the publication of the FOMC minutes later. There will be some nervousness over what kind of message the Federal Reserve will give in the minutes with regards to interest rates.

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