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The euro eased this morning to trade at 1.3172 down by 10 pips as the US dollar recovers slightly to trade at 82.26. The US dollar plunged on Friday after the US nonfarm payroll report disappointed traders. Lackluster data brought the Fed decision back into question. The first week of the month saw 5 central bank meetings ranging from Japan to Canada, with all bankers sitting tight. ECB President Draghi was dovish in his presentation after the rate decision. Mr. Draghi, who usually talks up the euro and the eurozone, took a very sheepish tone, glossing over strong data. The Bank of Japan on upgraded its opinion of the economy for the first time since July, describing it as “recovering moderately” on solid consumer spending and recovering corporate spending amid improvements in employment.
This morning data showed that the Japanese economy grew at an annualized rate of 3.8 percent during the three months through June in inflation-adjusted terms, sharply upgraded from preliminary data on the back of an upward revision to business investment. The JPY eased 47 points this morning to trade at 99.59 against the US dollar as better than expected data will help support Prime Minister Abe’s final decision on the sales tax rate hike. Over the weekend the Olympic committee announced that the 2020 Olympics will be hosted by Japan in Tokyo. The hosting of the Olympics in the Japanese capital is expected to produce ¥2.3 trillion in new demand including construction investment, replacement of home electronics appliances and sales of Olympics-licensed goods, SMBC Nikko Securities Inc. said in a recent report. The euro climbed against the Japanese yen to trade at 131.18 up by 53 points. As the sales tax hike is now all but assured, which will mean that the Bank of Japan will consider bumping up its asset purchases to keep the economy moving forward.
Stronger Chinese data over the weekend helped the Australia dollar trade in the green along with positive reaction to the new government after the election results showed Mr. Abbott securing a strong win. The AUD is trading at 0.9198. The trade and inflation data were the latest signs that China has emerged largely unscathed from currency declines and market setbacks seen in many emerging markets this summer. As money poured in from around the world to buy Chinese goods, China’s central bank allowed the renminbi to inch up 0.1 percent against the dollar last month. Consumer prices were only up 2.6 percent in August from a year earlier, compared to a 2.7 percent increase in July. At the same time, deflation slowed in producer prices, which fell only 1.6 percent in August after tumbling 2.3 percent in July while China’s trade surplus grew to $28.52 billion last month, the highest level since last December, as exports accelerated. The data helped limit the decline of the kiwi after data on manufacturing sales showed a significant drop. The NZD is trading at 0.7982 down by 23 points. The dairy contamination scare weighed heavily on dairy sales.