The dollar was a little lower versus the euro and stable against the yen, as there were rumors that the Japanese Prime Minister could call early elections and announce a postponement to the sales tax hike as early as today.
Dollar / yen was trading around 116.64 and was relatively close to the 117.06 7-year high registered the previous day. Many analysts are waiting for further deterioration in the yen, as not only will the tax hike in all probability be delayed but also a fiscal stimulus could be announced as well.
The euro also posted some gains versus the Japanese yen, climbing to 145.48.
The euro was somewhat taken aback by comments by ECB President Mario Draghi in front of the European Parliament that the ECB could do more if inflation stays low for too long. Draghi also saw downside risks to the growth outlook. Government bond purchases were possible in the future, according to Draghi. The euro however managed to rebound from its overnight low of 1.2442 to trade around 1.2488.
Looking ahead to the rest of the trading day, two statistics out of Europe will keep traders busy. Firstly, UK inflation for October will come out and given the prospect that the Bank of England Governor will have to write an explanation letter to the Chancellor should inflation eventually fall below 1%, it will be interesting to watch. The pound has been weak recently and it has made a 13-month low against the dollar. UK CPI is expected at 1.3%. Secondly, the German ZEW economic sentiment index will also be looked at.
Later during the US session Producer Prices and National Association of Homebuilders index will come out.