The euro opened at 1.3520 (8:00 am) after robust September German factory orders (3.3% m/m vs 0.5% expected, -0.3% August; 7.9% y/y vs 5.6% expected, 3.1% August) two hours earlier had propelled the euro from 1.3510 to 1.3552 in the two minutes following the release.
The dollar gained modestly to 1.3502 after the head of the Italian Business Association, Giorgio Squinzi, told reporters that falling prices and a strong euro were threats to the country's economy. Italian consumer prices fell 0.3% in October and yearly inflation was at a four year low of 0.7%. "There is a very negative sign, and that is that despite the one point increase in VAT the latest data show inflation is falling. This means we are well and truly in a situation of deflation. It is worrying," Giorgio Squinzi told Reuters. But by 9:45 am steady if small buying had brought the euro had climbed back to 1.3520
A report from Market News International stating that "Eurosystem sources had told them
that an immediate rate change was unlikely even amid an inflation dip, and that
LTROs (long-term refinancing operation) were not on top of the communications agenda," drove the euro to the day's high of 1.3548 in ten minutes, further advance blocked by offers at 1.3550 and higher.
Given that there is little market expectation for a change in ECB rate policy the opinion of an Italian business leader, however accurate, is not enough to move the currencies. Traders will have to wait for President Mario Draghi's news conference after the rate decision tomorrow for clues to the future course of ECB monetary policy.
After that brief run higher the euro corrected for the rest of the session, dropping to 1.3516 around the London close, back up to 1.3530 and then a slow descent into the New York close at 1.3514.
Yen and Euro/Yen
The dollar/yen began U.S trading at 98.62 and euro/yen at 133.33 after the yen
had weakened marginally in Asia. Early in the Tokyo session the yen dropped from 98.50 to 98.76 in under ten minutes, taking the cross from 132.90 to 133.45. The move essentially defining the range for the subsequent Asian and European sessions.
After the New York open the dollar/yen cycled between 98.60 and 98.70 for almost two hours until at 10:00 am, it moved from 98.59, the third trip to the bottom since the open, to 98.74 driven higher by the euro operating through the euro/yen which was reacting to the MNI report that the ECB wold not ease monetary policy at tomorrow's meeting.
The cross fell sharply after the rush and in a bit over half an hour was back at the starting line of 133.40 taking the dollar/yen back to 98.58. The impetus for the price movement came solely from the euro and once the united currency had returned both the cross and dollar/yen subsided to limited range trading.
The cross closed at 133.34 and the dollar/yen at 98.66. Neither is likely to vary much until the market hears Mr Draghi speak.
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