FX markets were little changed on Thursday although analysts are closely watching short-term technical levels which could lead to a break-out from recent trading ranges for some currency pairs, with the common denominator being a stronger US dollar.
In that regard, analysts at Unicredit wrote this morning to clients saying that: "Many exchange rates
are still testing key chart levels whose full break could extend the USD rebound following the Fed's delay of tapering. As long as these thresholds are not crossed, range-trading is likely to continue, even in the case of a busy daily agenda like today's [Friday]."
Thus, the US currency unit was generally higher yesterday following data which showed that initial US weekly unemployment claims fell unexpectedly in the seven days ending on September 14th, by 5,000 to reach 310,000 (Consensus: 325,000).
The euro/dollar fell back only slightly, by 0.24% to 1.3517.
Nevertheless, for the most extreme short-term the most pressing matter is what is transpiring inside the Beltway, in Washington D.C.. Capitol Hill faces the risk of a goverment shutdown come next Tuesday and of the debt-ceiling being breached a fortnight later, threatening a hypothetical default. Markets seem sanguine about the prospects for a deal finally being reached. Yet it remains to be seen how they will react to the news-flow regarding this political "high-wire" act or any negative surprises.
Against that backdrop, US President Obama reiterated his stance that he will not negotiate over the debt ceiling.
Also worth pointing out, the President of the Federal Reserve bank of Richmond, Jeffrey Lacker, reportedly said that it will be harder for the US central bank to communicate credibly in the future. He also believes the tapering of quantitative easing should start in October.
His opposite number at the Minneapolis Fed, Narayana Kocherlakota, however, remarked that the central bank must use all tools, no matter how unconventional, to boost employment.
There is some market commentary to be heard this morning which is rather critical of the Fed´s recent communications.
Back in the Eurozone, European Central Bank Governing council member Yves Mersch said Eurozone economic growth remains weak, with only the first green shoots of recovery apparent and unemployment unacceptably high.
Worth pointing out as well, Spanish Prime Minister Mariano Rajoy announced during a Bloomberg interview that the country may deepen its labor reform after taking advice from the OECD. In other news, it has been revealed that more than half of UK company shares
are owned by foreign investors.
Thursday's balance of payments release in the UK showed that the current account deficit in the first quarter was the largest on record - after being revised up to £21.8bn, or 5.5% of GDP, the largest since data began in 1955. Economists highlighted how that shows the UK's external position has become more unbalanced, not less. There appears to have been an unusually large surge in profits paid overseas and drop in receipts by domestic owners of overseas firms in Q1, both of which were reversed in Q2, economists at Barclays Research explained.
GBP/USD dropped 0.23% to 1.60746.