Market Drivers October 26, 2015

GE IFO 108.3 vs. 108.2
Commdollars better bid
Nikkei 0.65% Europe 0.0%
Oil $44/bbl
Gold $1165/oz

Europe and Asia:
EUR GE IFO 52 vs. 108.1K
GBP UK BBA Mortgages 44.5K vs. 46.2K

North America:
USD New Home Sales 8:30

The euro saw a modest bump at the start of the week’s trade as short covering helped lift the unit by half a cent before it ran into resistance at the 1.1050 level. After last week shellacking which saw the single currency lose more than 300 points in less than 48 hours when ECB President Mario Draghi hinted that the central bank may increase QE during the December meeting, the pair finally found some footing in Asian and early European trade as the 1.1000 level attracted some bargain hunters.

The only news release of the night – the important IFO survey of corporate sentiment – proved to be a mixed bag with the Business Climate reading coming in a bit better at 108.3 versus 108.2 eyed but the Current Assessment numbers coming at 112.60 versus 113.50 projected.

The commentary from IFO institute itself noted that German industry was showing itself to very resilient and that the auto sector – despite the scandal from VW – was actually showing that conditions and production plans will increase. IFO also stated that the domestic economy was the driving force behind growth which could perhaps explain the absence of negative knock on effects from a challenging export picture.

The euro actually sold off in the aftermath of the release dropping from 1.1050 to 1.1025 but remained relatively well supported at these levels. After last week’s shocker from Mr. Draghi attention will now turn to Ms. Yellen and the Fed as the FOMC announces its decision this Wednesday. No one in the market expects any change in policy, but traders will scrutinize the text for any change in tone although as we noted last week, it will be difficult for the Fed to sound hawkish amidst a climate of easing by PBOC and ECB.

In the meantime the EUR/USD is likely to tread ground for a few days as it digests its recent losses and tries to find some support around the 1.1000 level. If last week’s action was driven by Mr, Draghi’s rhetoric, this week’ price gyrations will likely be heavily influenced by what the Fed has to say.

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