The main economic data point released during the European session on Monday was the Eurozone industrial output figures for July, which showed a gain of 1.9% year-on-year. This number was higher than the upwardly revised 1.5% increase in June (from 1.2%). Meanwhile industrial production numbers on a monthly basis were also quite upbeat as output rose for the first time in three months by 0.6% from June to July.
The euro did not react much to the data and mostly took direction from the broader market tone. Early in the session the euro rose against a broadly weaker dollar to reach a 2-week high of 1.1372 before fading gains. It fell to 1.1291 as the dollar started to turn around in the early US session.
Sterling took direction from the general market sentiment in the absence of UK data. The pound mirrored the euro and rose early versus the dollar to a high of 1.5469 before easing down to 1.5385.
The dollar started the week softer and will likely see reduced demand ahead of a key risk event later this week. Investors are mostly in a wait-and- see mode ahead of the FOMC policy meeting and announcement on Thursday. In recent weeks it has become very unclear whether the Federal Reserve will choose to start hiking rates at this meeting or not. Due to some disappointing data out of the US lately and concern over China, the Fed could choose not to start tightening.
The dollar was particularly pressured against the yen and dipped below the key 120 yen level today to 119.96. Meanwhile, the Bank of Japan policy meeting on Tuesday will also be a risk event for the dollar/yen pair.
The Australian dollar was one of the best performers against the greenback and extended last week’s rally to reach a high of 0.7134 in the Asian session. The aussie consolidated around this high despite political uncertainty in Australia.
The Australian Prime Minister Tony Abbott was facing a leadership challenge today. The result was the toppling of Abbott by cabinet rival Malcolm Turnbull who is viewed as pro-business and, therefore, this turns out to be positive for the Australian currency. The next risk event for the AUD will be Tuesday’s publication of the Reserve Bank of Australia meeting minutes.