Inflation day

The Asian session has been a low volume affair due to regional holidays for Deepavalali with the data releases doing very little for FX markets. The Japanese trade data showed a larger deficit than expected at JPY 958 billion versus the consensus forecast of JPY 780 billion, as both imports and exports showed solid gains. In Australia the CPI data fell in the new trimmed mean reading following the government’s decision to remove carbon emissions tax component. The month-on-month number came in at 0.4% versus the 0.5% expected, taking the yearly number down to 2.5% from 2.7%.

The euro continues to trade with a bearish tone as so called ‘’ECB sources’’ suggested the ECB was preparing for further easing measures in the form of corporate bonds. An article in the FT to the contrary source story provided a dead cat bounce for the single currency.

The FX markets will focus on the BoE MPC minutes this morning as many expect the voting pattern to shift from a 7-2 pattern to an 8-1 outcome. This may be a little premature as we need to remember the last BoE meeting was pre-last week’s global growth and deflation scare.

The main highlight today will be the US CPI release and the market will be looking for any signs of a weaker reading. The US 10-year yield trades above 2.20% and a fresh weekly high as we remind ourselves of the taper of the taper comments from the St Louis President James Bullard. The consensus is for a core reading of 0% month-on-month and a 0.1% decline on the yearly gauge to 1.7%

EUR/USD

Supports 1.2675-1.2605-1.2501 | Resistance 1.2750-1.2800-1.2840

USD/JPY

Supports 106.70-106.20-105.75 | Resistance 107.20-107.45-108.00

GBP/USD

Supports 1.6025-1.6000-1.5940  | Resistance 1.6145-1.6185-1.6225