The Asian FX trading session was uneventful as many investors are being cautious ahead of certain key events in Europe today. European manufacturing data are due and the Spanish government is having a bond auction. The main focus will be on the European Central Bank which will be holding its monthly policy meeting and will announce interest rates. After two back-to-back interest rate cuts and last month’s provision of nearly half a trillion euros in three-year loans, the ECB is expected to keep rates unchanged at a record low of 1.0 percent. If the central bank signals any possibility of a rate cut in the near term, this will paradoxically lift the euro..
Euro crawled back up against the dollar to move further off a 16-month low reached in the New York session, peaking at 1.2727.
The British pound settled into a range after plunging almost 180 pips against the dollar on Wednesday to a three-month low of 1.2308. Attention will be on the Bank of England later today. The BOE will announce the outcome of its January 11-12 policy meeting and is expected to keep its quantitative programme unchanged, leaving interest rates at 0.50 percent.
Markets took in stride the latest inflation reading from China, which showed consumer price inflation slipped to 4.1 percent in December to its lowest level in 15 months. The headline inflation number was just above market expectations of a cooling to 4.0 percent. This increases speculation that the People’s Bank of China is poised to ease monetary policy.
The Australian and New Zealand dollars traded little changed after a report showed Chinese consumer prices rose by 4.1 percent in December from the year earlier.China is Australia’s main trading partner. AUDUSD traded between 1.0285-1.0315.
The New Zealand dollar maintained three-day gains against the greenback and the yen. NZDUSD hit a two- month high of 0.7979.
USDJPY continues to trade in a range all week, in the upper 76s.