Daily FX market outlook

Daily FX market outlook

Pound down in thin trading due to Chinese holidays.

There were few major moves during today’s Asian trading as holidays in China and a lack of important developments created little volatility.

Dollar / yen traded in a narrow range between 101.25 and 101.50, following unsuccessful attempts by the pair to break below 100 the previous couple of weeks.  In economic data, the Bank of Japan’s quarterly Tankan survey of business confidence came in lower-than-expected for large manufacturers, but was steady compared to the previous quarter.  The Big Manufacturers’ index was at 6 during the third quarter, the same as the second quarter.  Expectations were for a number at 8.

Euro / dollar was also relatively steady around 1.1230, keeping Friday’s large gains following reports that Deutsche Bank would be spared the full $14 billion fine from the US authorities and instead have to pay something around $5-6 billion.  A smaller fine would mean that the bank has enough equity to pay the fine without the need to raise funds from existing shareholders, bondholders or indeed the German government.

Sterling was off sharply in early Asian trading and remained under pressure throughout the session.  Pound / dollar was knocking on the 1.29 handle following a close of 1.2977 in Friday’s US trading.  The pair was last trading at 1.2907 and 1.29 is a level that has not been breached since mid-August.  Euro / pound also managed to rise above the 87 pence level, making a high of 0.8704 (a 1-week high).  The catalyst for sterling’s losses was a speech by the UK Prime Minister on Sunday setting March as a possible deadline for submitting the country’s application to leave the EU.

Looking ahead to the remainder of the day, final Eurozone Manufacturing PMI together with UK Manufacturing PMI for September will be out during the first half of the European session.  Later during the US session, ISM manufacturing PMI and construction spending are likely to keep traders busy.