The main move on Tuesday was the decline seen in EURUSD, which saw the week’s short-held gains put aside as the market reacted to fresh speculation of stimulus from the ECB. The central bank bought covered bonds for a second day in a row as part of measures announced back in September. There were also unfounded reports in some media about more measures to come (corporate bond purchases), but so far the ECB has not committed to what form further measures may take. The move on EURUSD added to the slightly firmer dollar tone on other majors. EURGBP continued its correction from the highs above 0.8000 seen earlier last week.
Overnight, we’ve seen a largely anticipated fall in Australian inflation, down to 2.3% (from 3.0%) on the headline measure. The Aussie was largely unmoved, trading slightly firmer vs. the US dollar into the European open. Note that New Zealand inflation, due to be released overnight, is seen slowing markedly (from 1.6% to 1.2%) and adding to the growing picture of inflation readings coming in lower than expected.
For Wednesday, the minutes to the October MPC meeting will be watched by GBP closely, given that two members last month voted for higher rates. Since then, the global environment has become less certain, as reflected in recent minutes from both the Fed and RBA. As such, it would be surprise to see this vote remain intact. The market has already moved to reflect this outlook, but if both were to move to steady rates, sterling would likely come under some further modest selling pressure as a result. Otherwise, eyes on US CPI at 12:30 GMT, where move to 1.6% is anticipated.