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    European Session – Euro slips as Eurozone inflation remains negative, upbeat US consumer sentiment lifts dollar

    The euro traded heavily since yesterday’s sharp decline against the dollar and remained below the key 1.14 level. Eurozone inflation remained negative as indicated by the final CPI number released today, which came in at -0.1% year-on-year, as expected. August trade data for the region disappointed and showed the trade surplus was lower-than-expected. The euro touched a low of 1.1333.

    Going forward the single currency may remain under pressure ahead of next week’s ECB policy meeting especially after dovish comments by policymaker Ewald Nowotny yesterday.

    The pound is on track to end the week higher versus the dollar. After yesterday’s rally to a three-week high of 1.5507, it eased down to 1.5433 today. A broadly softer dollar this week helped buoy sterling.

    The dollar managed to rebound against the yen today after some comments from Fed policy makers in the past 24 hours that were more supportive of a rate hike this year. Both William Dudley (President of Federal Reserve Bank of New York) and Loretta Mester (Cleveland Federal Reserve President), suggested that lift off before year end remains a possibility.

    Meanwhile, US data today helped support the greenback. The preliminary October University of Michigan consumer sentiment index beat forecasts to print a reading of 92.1 versus 89.0 expected. This month’s reading was higher than September’s final reading of 87.2. Other data showed US industrial production fell for a second straight month in September, slipping 0.2% but this was in line with expectations. However, the August number was revised to show a 0.1% dip, which was smaller than the initial 0.4% drop.

    The dollar reached a high of 119.24 yen today after bouncing off yesterday’s low of 118.05. The main risk for the US currency going forward would be the FOMC meeting at the end of this month.

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