USD

The US dollar lost ground on Friday, mostly because of the weak economic data and the prospect of a government shutdown. Lawmakers only have a few hours left to come up with a plan to avoid default, and it appears that Republicans and Democrats still can’t see eye to eye. 

However, as we have seen in the past, they do tend to come up with something on the very last minute. If that’ll be the case again, we might see a relief rally from the dollar. US Chicago PMI is up for release today and an improvement from 53.0 to 54.5 is expected.

EUR

The euro staged a decent run against the dollar on Friday, but the 1.3550 level held as resistance then the pair gapped lower over the weekend. Data from the euro zone was mostly weaker than expected, with Germany printing a flat CPI reading and France showing a 0.4% decline in consumer spending. German retail sales data is up for release today and a 0.9% rebound is eyed.

GBP

The pound made a test of its recent highs against the dollar and its rally doesn’t seem to be showing any signs of stopping anytime soon. Even though UK’s index of services fell short of expectations, the positive outlook for the British economy was enough to support the pound. Data on net lending to individuals and mortgage approvals are up for release today, so signs of improvement could help GBP/USD extend its gains past 1.6200.

JPY

The yen was a big winner last Friday, as improved inflation data and risk aversion both lifted the Japanese currency. Japan’s economic data came in mostly in line with consensus earlier today, with the retail sales figure posting a 1.1% increase and manufacturing PMI climbing from 52.5 to 52.2. Housing starts, however, fell short of expectations and posted an 8.8% increase instead of the estimated 12.9% jump. No other reports are due from Japan today.

CHF

The Swiss franc was able to rally against the dollar again, pushing USD/CHF below the .9100 support level. Switzerland’s KOF economic barometer was stronger than expected at 1.53 versus the 1.46 estimate. There are no reports up for release from Switzerland today so it could be all about risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to benefit from the dollar selloff that occurred last Friday, as risk aversion took the best of them. AUD/USD slid to the .9300 handle while NZD/USD moved further below .8300 and USD/CAD held on to the 1.0300 handle. Over the weekend, New Zealand printed a 1.4% rebound in housing starts but the previous figure was revised down to -3.4%. Earlier today, China’s official manufacturing PMI came in above 50 but lower than the estimate. Canadian monthly GDP and medium-tier inflation data are due today.

By Kate Curtis from Trader’s Way