The euro was able to eke out some gains against the US dollar in the European session, bouncing off a recent six-week low. After a sharp decline last week due to speculation that the European Central Bank will cut interest rates at its policy meeting on Thursday as a result of recent soft inflation data in the Euro zone.
EURUSD moved up to the key psychological 1.35 handle , hitting a session high of 1.3512. Euro zone Sentix investor confidence rose more than expected, helping pull up the single currency, as well as the region’s final manufacturing PMI reading printing as expected.
Sterling climbed higher after better-than-expected UK data. Construction PMI rose to a six-year high of 59.4 in September. Cable gained over 30 pips in the European session to reach a high of 1.5971. Focus now shifts to tomorrow’s services PMI. Meanwhile, the Bank of England policy meeting on Thursday will also be a key driver for the British pound.
The US dollar has been little changed against the yen since Friday, consolidating in a range after a sharp rally to 98.83 on Friday. USDJPY edged slightly lower in the European session, to trade between 98.56 and 98.70 yen.
The main support for the greenback in recent days has been speculation of a potential Federal Reserve tapering beginning sooner than March 2014. Meanwhile, the main USD driver will be Friday’s jobs report – the October nonfarm payrolls data which has been delayed due to the US government shutdown.