JPY was mixed in the European morning after the Tankan report came in as expected. The Asian market felt there was enough in the Tankan report to increase the chances of a January hike in rates. The market reaction was muted and the European morning saw currency pairs retain the recent themes.
The JPY crosses saw good Japanese buying, with investment managers out of Asia reportedly buying CAD/JPY, ZAR/JPY, PLN/JPY and NOK/JPY. The interest helped to underpin EUR/JPY, while GBP/JPY benefited on Japan Tobacco's bid for UK's Gallaher. USD/JPY was helped higher amid the cross flows, yet also maintained the supportive tone amid positive dollar sentiment. The pair cleared 118.15/20 offers and stops at 118.25 gave way. There was no follow through but the pair stayed bid around 118.20 after EUR/USD broke down to challenge the low 1.31's.
The afternoon focus will remain on the dollar amid a slew of US data. US CPI is due, along with industrial production and TIC data. The data will offer a snapshot of where the US is in the business cycle and whether inflation is under control. The dollar looks like it wants to go higher still into the weekend.
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