EUR/USD saw somewhat of a relief rally

EUR/USD

All eyes for the pair today were firmly placed on the host of GDP readings from the Eurozone, notably Germany and France. First up on the calendar was the French release which came in at 0.0% despite expectations of a 0.1% expansion, this helped spur the initial downside momentum for EUR/USD ahead of the crucial German reading. Expectations for the German number were for a disappointing figure, with the release expected to reveal a 0.1% contraction in the German economy. However, the reading managed to fall below these already low expectations for the nation by coming in at -0.2%. This prompted further weakness for the pair with prices falling below 1.3350 despite the German statistics agency attributing the fall to the high level of growth at the start of the year due to the warmer weather. This release was followed by the Eurozone reading which once again fell short of expectations (0.0% vs. Exp. 0.1%). However, EUR/USD actually saw somewhat of a relief rally as given the earlier French and German releases, some participants had positioned themselves for a far weaker reading from the Eurozone. Thereafter, the pair saw further upside amid a de-escalation of geo-political tensions which saw the USD index fall after Putin said Russia will do its utmost to stop bloodshed in Ukraine, while the Finnish PM said the EU is not considering further sanctions against Russia. The USD weakness was then further exacerbated by a weak jobs report and thus ensured that EUR/USD finished the session in positive territory.

GBP/USD

Overnight saw the release of UK RICS House Price Balance (49% vs. Exp. 51%), with RICS saying UK demand fell for the first time since January 2013. However, this failed to filter through to GBP/USD, with GBP/USD seen initially lower as the pair hit a four-month low after breaking below its 200DMA seen at 1.6664. In terms of today’s session, commentary from the UK was relatively light with BoE’s Miles reiterating the central bank’s stance as revealed by yesterday’s QIR by saying the BoE will not be pushed into raising rates sharply because the inflation outlook is subdued. Thereafter, the pair’s price action was largely dictated by movements in the USD index with GBP/USD prospering from the USD weakness stemming from the apparent de-escalation of tensions regarding the Russian/Ukraine situation. Looking ahead, attention now turns to tomorrow’s UK GDP reading, although expectations are for the metric to remain unchanged from the previous quarter.

USD/JPY

Today’s Asia-Pacific session saw a lack of economic commentary or tier 1 data for Japan in the aftermath of yesterday’s disappointing GDP reading, with the pair guided by the USD index and interest differential flows. In the early stages of the European session the US 10yr was led higher by the German Bund which moved above the 150.00 level as the German 10yr yield broke below 1% for the first time ever. This saw the pair retrace from its earlier weak-JPY inspired gains with the pair then trading in a relatively rangebound manner heading into the weekly jobs report from the US. The headline initial jobless claims figure disappointed as it revealed a 21k increase in claims from last week, which subsequently saw USTs extend their gains and exacerbate the earlier flows into JPY. Thereafter, the pair traded in a relatively tight range with a lack of further catalysts to guide price action. Looking ahead, tomorrow sees an absence of tier 1 data from Japan, therefore focus for the pair may shift towards any continued moves is US fixed income products or geopolitical developments.