Dollar jumps to fresh 8-month highs ahead of data; Stock markets shrug off geopolitical tensions

On Wednesday the dollar rose to fresh eight-month highs, as investors eyed of a series of U.S. economic data due later in the day.

USD/JPY edged up 0.17% to 122.73.

On Tuesday the U.S. Commerce Department said that gross domestic product rose at an annual rate of 2.1% in the three months to September, matching expectations. Preliminary data initially said U.S. growth was at 1.5% in the third quarter.

On Wednesday, the minutes of the Bank of Japan's October meeting showed that some board members believe that an output gap was one reason the country was taking longer to reach inflation goals.

These worries underlined a long-lasting concern that the delay in meeting the BOJ's 2% inflation target meant that its quantitative easing measures had not been effective. The dominant view, however, was that the delay in hitting inflation target was due to depressed oil prices.

EUR/USD slid 0.6% to fresh seven-month lows of 1.0579, before recovering to 1.0584.

Sterling was up 0.11% to $1.5099.

The British currency strengthened after British finance minister George Osborne surprised critics by sticking with his budget surplus target for the end of the decade, even as he abandoned a controversial plan to make big savings in one part of the welfare budget, Reuters has reported. The chancellor told parliament on Wednesday that he was aiming for a surplus of 10.1 billion pounds by the 2019/20 financial year, slightly higher than a previous target announced in July. He added he was aiming to borrow less in the current financial year than estimated in July.

Market sentiment was hurt after the news on Tuesday that Turkey shot down a Russian warplane on the Syrian border. Ankara claimed the SU-24 warplane had entered Turkish airspace, but the Kremlin has rejected those claims. Responding to the incident, Russian President Vladimir Putin called the downing "a stab in the back," and warned it would have serious consequences for the Russian-Turkish relationship.

The Turkish lira, down nearly 1% in the previous session, is just 0.17% softer as the Istanbul stock market climbs 0.01%.

Despite the damaged sentiment, European indexes were higher on Wednesday, following a mostly soft Asia-Pacific session. British FTSE 100 gained 1.04%, while German DAX 30 added 1.84% and France's CAC 40 was up 1.49%.

Moscow’s Micex equity index, which fell 3% on Tuesday, is up 1.1% as the ruble weakened by 0.65% versus the greenback.

"While we all continue to keep an eye on the geopolitical tensions between Russia and Turkey, there is no evident panic shown by markets so far," said forex analysts at Citi.

Goldman Sachs yesterday predicted that stocks will go absolutely nowhere next year, thanks to rising interest rates from the Federal Reserve. And Oxford Economics said it predicts a short-lived correction in the first half of 2016 as investors face the music after excessively upbeat expectations for earnings next year.