RISK ON SENTIMENT RETURNS AS THE EURO AND COMMODITY CURRENCIES RALLY

EURO RELIEF RALLY

The single currency staged a relief rally against the U.S dollar, Japanese Yen and the British Pound this week, as near-term risks in Catalonian were put aside. Catalonia's President Carles Puigdemont stopped short of calling independence from Spain, and instead called for dialogue to resolve the crisis.

Foreign exchange markets reacted positively to news, with the EURUSD pair rising towards the 1.1900 level, after hitting 1.1669 last week. The euro also gained lost ground against the British pound, with the EURGBP pair briefly reclaiming the key 0.9000 level.

COMMODITY CURRENCIES RECOVER

Commodity related currencies bounced back against the greenback this week, as a combination of U.S dollar weakness and a recovery in commodity prices helped to underpin strength in the Canadian dollar and Antipodean currencies.

The Australian dollar recovered the $0.7800 level against the U.S dollar, while the Kiwi recovered the $0.7100 handle against the U.S dollar, despite homegrown political woes. The Canadian dollar also pulled back ground against the U.S dollar, with the USDCAD pair dropping back beneath the $1.2500 level, after previously hitting a high of 1.2597.

POUND ROLLERCOASTER

The British pound had another rollercoaster week against the U.S dollar, with the GBPUSD initially clawing back last-weeks steep losses. The GBPUSD pair rose to 1.3265 by Thursday, after receiving a boost from better than expected economic data from the United Kingdom, and improving trading sentiment surrounding the British pound.

Traders would later sell the pound below the 1.3200, with the GBPUSD pair hitting 1.3121, as the Bank of England warned on worsening consumer credit conditions, while updates from EU officials revealed Brexit negotiations had shown no sign of actual progress. The British pound would later go on to recover all its losses on Friday, and hit a new weekly high of 1.3283.

FOMC MIXED MESSAGE

The U.S dollar slipped back below its key 200-week moving average this week, after the FOMC Meeting Minutes provided a mixed message to market participants. U.S policy makers revealed that an upcoming rate hike in December seemed increasingly likely.

However, the U.S dollar index declined on further comments inside the minutes, as FOMC voting members said they had real concerns about persistently low inflation in the United States economy.