Financial markets appeared to have begun the healing process in the wake of last Friday’s tragic terror attacks in Paris which influenced investors moving into safety and away from high-yield asset classes. Yesterday’s strong close on Wall Street and the associated optimism from market participants filtered through into the overnight session, with the Nikkei positing a gain of 1.2%. The Japanese yen was caught in the crosswinds as investors rotated away from perceived safe-havens as risk appetite perked up, causing USDJPY to ebb higher during the overnight session.
The big dollar is pushing higher on an index basis early this morning, yet the heavy weighting of the euro in the DXY basket appears to be one of the main catalysts for DXY’s upward momentum this morning. The pound is holding up relatively well against the greenback as inflation for the month of October hit the wires at the pace expected, falling at a rate of 0.1% when compared to a year ago. This is the same rate of deflation that was seen as the reading in September, suggesting the tightening labour market has yet to have any impact on headline inflation, and reinforces the Bank of England’s cautious outlook towards its medium-term inflation outlook and associated monetary policy. GBPUSD is essentially flat this morning after initially dipping lower on the news, but the pair has made decent strides since the sharp drop in early November.
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