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FX markets are coasting into the end of the quarter. By that we mean that the majors are not in the mood to push the trends that have been in place in recent weeks. To that end, cable has been hugging close to the 1.65 level, after the high earlier in the month of 1.6786 and the single currency is around 1% from the high for the year recorded earlier this month. The exception to this has been the Aussie, which has been gaining in confidence since the start of the month, making a new high for the year at 0.9158. But there has been a reluctance on the part of the Aussie and the price action has shown this, proving to be on the choppy side on AUDUSD. Still, the fact that the Aussie has put in such a strong performance during a month when concerns over China have come to the fore, shows the extent to which established relationships have broken down.

For today, IFO data takes the attention early on in Germany, with markets looking for a small fall to 110.9 to the headline index. Thereafter, CPI data in the UK is seen falling further, from 1.9% to 1.7%. The attention in the UK has shifted away from the inflation numbers to a broader cross section of indicators in the wake of the latest Inflation Report. Still, inflation data has consistently surprised to the downside over the past few months so sterling could be vulnerable to a further downside surprise.

Further reading:

German IFO Business Climate falls to 110.7 – EUR/USD slides

Mixed US and Eurozone Manufacturing PMI lift Euro