Daily FX Trading Update: ECB to Loosen QE Restrictions, UK GDP Next

The US dollar regained a bit of ground against its peers when most of its medium-tier releases came in better than expected. Flash services PMI jumped from an upgraded 52.3 figure to 54.8, outpacing the consensus at 52.4. The goods trade balance showed a smaller deficit, likely making a positive contribution to Q3 GDP. Preliminary wholesale inventories ticked higher to show a slight dip in demand while new home sales increased. Pending home sales, initial jobless claims, and durable goods orders data are lined up today.
The euro got another blow when sources close to the ECB shared that the central bank is considering some adjustments to its QE program, apart from extending it past the March 2017 end-date. These could involve less restrictions on the availability and size of bond purchases, which could further boost liquidity and inflation in the region. Data from the region fell short of estimates, with the German GfK consumer climate index down from 10.0 to 9.7 instead of improving to 10.1 and Italian retail sales lower by 0.1% instead of showing the projected 0.2% uptick.
The pound was able to recover against its peers as traders seem to be positioning for an upside GDP surprise. BBA mortgage approvals also came in better than expected at 38.3K versus 37.3K. The preliminary Q3 GDP could show a 0.3% growth figure, slower than the earlier 0.7% reading, but a stronger than expected result could be printed. CBI realized sales data is also due and a rise from -8 to -2 is expected.
The franc had a mixed performance as it functioned more as a counter currency instead of establishing its own direction. The UBS consumption indicator is due today and an improvement from the earlier 1.53 reading could be positive for the Swiss currency.
The yen also had a mixed performance since it simply reacted to country-specific factors when there were no reports out of Japan. There are still no major reports lined up for today so market sentiment could push yen pairs around ahead of Japan’s consumer spending and inflation releases on Friday.
Commodity Currencies (AUD, NZD, CAD)
The comdolls were in a weak spot even as the US EIA report showed a reduction in crude oil stockpiles of 0.6 million barrels. Australia printed a sharper than expected 1.0% fall in import prices versus the estimated 0.7% drop while New Zealand showed a much wider trade deficit spurred by a 5.7% drop in exports. There are no other reports due from the comdoll economies for the rest of the day.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com