The euro remained weak today, testing the key 1.10 level against the dollar. The single currency has come under pressure ever since ECB President Mario Draghi hinted last Thursday at a possible increase of QE at the ECB policy meeting in December.
The euro did not gain much by better-than-expected German business confidence data released today. The IFO survey weakened to 108.2 in October from a prior 108.5 but beat expectations of a 107.8 result. After reaching a high of 1.1055, the euro fell to a session low of 1.1003 before bouncing back up to 1.1050.
Sterling started the new trading week by opening close to 1.5300 before bouncing higher throughout the day. After disappointing US home sales numbers, the pound surged on a weaker dollar to reach 1.5381. The main risk event ahead for the British currency will be Tuesday’s UK GDP data. The first estimate of third-quarter GDP is forecast to show the UK economy slowed to around 0.6% from growth of 0.7% in the second quarter. A lower number would have a negative impact on the pound.
The dollar dropped sharply against the yen after the release of US new home sales data. Sales of single-family homes declined 11.5% to a seasonally adjusted annual rate of 468,000 units, the lowest level since November 2014. This was a bigger drop than the forecasted decline to a rate of 550,000 units. Meanwhile, August sales were revised lower to 529,000 units from the previously reported 552,000 units. The greenback touched a session low of 120.59 yen soon after the data.
The risk for the dollar/yen pair is quite high this week due to central bank meetings in the US and Japan. The Fed holds its policy meeting on Wednesday while the Bank of Japan announces its policy on Friday. The two banks are on diverging paths, as the Fed is expected to raise interest rates soon while some expect the BoJ to announce more policy easing.