FX Dictated by JPY Pairs

The dollar was mixed, edging higher versus the yen but falling against the euro and sterling. Economic data from the US saw wholesale inventories grow in August by 0.1%, but lower from the prior month at 0.3%. The greenback will likely remain confined to recent ranges ahead of key reports due out later in the week, including August trade balance, PPI, retail sales, business inventories, and University of Michigan consumer sentiment survey.

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Euro Rebounds

ECB Board member Liikanen delivered a hawkish tone in his speech on Wednesday, reiterating the upside risks in price stability. While he sees potential for market turbulence to create downside uncertainty for growth, but policy decisions are separate from measures to address volatility – adding that the Bank would not bail out failed investors. Liikanen commented on exchange rates, saying euro levels were not a target, but rather a source of information. Meanwhile, the ECB’s Gonzalez-Paramo said that foreign exchange rates should be reflective of fundamentals, with volatile rates detrimental to growth. He added that the market turmoil has increased growth uncertainties in the Eurozone, but the crisis is too short term. The ECB is largely expected to lift interest rates by another 25-basis points to 4.25% by year-end given the current outlook for inflation and growth.