Talking Points:

  • Euro may fall as ECB minutes cool QE taper speculation
  • Aussie Dollar down on disappointing retail sales figures
  • NZ Dollar undermined by continued political uncertainty

Another quiet day on the European data front precedes an only nominally more interesting offering from the US. Statistics on factory and durable goods orders are due to cross the wires, but whatever outcomes emerge seem unlikely to make waves absent wild deviations from expectations as markets look ahead to Friday’s release of official labor market data.

Minutes from September’s ECB monetary meeting might make waves however. Central bank President Mario Draghi signaled that a decision on the fate of QE asset purchases will be made in October following last month’s conclave, hinting that a substantive conversation laying the groundwork for an important policy pivot was had. This document released today may offer a flavor of what was discussed.

ECB policy bets have firmed a bit over the past month, hinting that investors are positioning for the central bank to begin scaling down stimulus. A run of broadly upbeat data releases over the same period perhaps explains such optimism. Disinflationary courtesy of Euro gains since the beginning of the year may excuse continued inaction however. Clues to that effect might the currency lower.

Most major currencies marked time in exceedingly quiet Asia Pacific trade. The Australian Dollar stood out however, sinking in the wake of disappointing retail sales data. The currency fell alongside local bond yields, hinting the soft result was seen as delaying the next RBA interest rate hike. As it stands markets don’t envision tightening at least until July 2018.

Fading rate hike prospects also stung the New Zealand Dollar. It too declined alongside its country’s government bond yields. Political uncertainty may have been the culprit here after NZ First party leader Winston Peters said he feels as if he is “between the Devil and the deep blue sea” as the National and Labour parties vie for his support form a coalition government after an inconclusive general election.

What will drive the major currencies in the last three months of the year? See our forecast here!

Asia Session

Euro May Fall as ECB Minutes Cool QE Taper Speculation

European Session

Euro May Fall as ECB Minutes Cool QE Taper Speculation

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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