Euro holds ground as data test ECB policy outlook

Steady on.

Investors are keeping an eye on this morning’s run of economic data– but attention remains on the policy outlook at central banks, leaving the euro making modest gains. The shared currency is up 0.1 per cent at $1.1754, while the dollar index is also down 0.1 per cent at 93.859.

As Koon Chow, strategist at UBP explains:

The market is playing a rates game at the moment, pondering whether the Federal Reserve or the European Central Bank comes up more hawkish.

Market participants are inclined to believe that the Fed has the upper hand here given that the lead contenders for the position of Fed chair suggest either continuity or more hawkishness. Meanwhile the ECB is likely to announce [on Thursday] the start of reducing stimulus, but down a slow path in order not to upset the low-inflation eurozone recovery. Given these balance of risks, the market is inclined to more buy the dollar, at least for now.

According to analysis from Nomura, an announcement on the Fed chair nominee is “likely before President Trump goes on his 3-14 November Asia tour.”

In the meantime, the moves on European stock indices are also muted, with the region-wide Euro Stoxx 600 flat, as is Frankfurt’s Xetra Dax 30 and London’s FTSE 100.

Spains Ibex 35 is catching up, rising 0.4 per cent, after it missed to on a wider rally on Monday as investors reacted to the stand-off between Madrid and the regional government of Catalonia which intensified over the weekend.

The lingering post-election glow in Japan is standing out on Asian equities markets. Shinzo Abe’s emphatic win is helping to offset the impact the weaker New York session, where the S&P 500 closed down 0.4 per cent on Monday.

The Nikkei 225, which closed higher for the 16th straight session, extending its longest winning streak on record. Tokyo’s Topix climbed 0.7 per cent.

There was a more modest showing elsewhere, with a 0.2 per cent gain for the Shanghai Composite and a 0.4 per cent slip for Hong Kong’s Hang Seng.

Oil prices are losing the support from the weaker dollar, coming off gains to slip into the European morning. Brent crude is down 0.3 per cent at $57.22 a barrel. The US marker, West Texas Intermediate, is also down 0.2 per cent at $51.80.