EUR/USD
Heading into the European open the pair was immediately placed on the backfoot as the post-FOMC-minutes strength seen in the USD index subjected the pair to further losses as EUR/USD slipped below 1.3250. This move subsequently led UBS to close their short EUR/USD position as their 1.3248 target was reached, with analysts adding that the pair could now be subject to a modest recovery with 1.3248 set to act as support for the pair. Today all eyes for the Eurozone were placed on the slew of Eurozone PMI releases. First up on the schedule was the French releases, which painted a largely mixed picture of the French economy, however the German release was the main focal data point for Eurozone participants as the report exceeded all expectations, thus providing the pair with some mild reprieve. The recovery for the pair was further bolstered by reports that Russian President Putin and Ukraine President Poroshenko are to hold de-escalation talks next week. Thereafter the pair traded in a relatively rangebound manner as the slew of US data failed to provide the pair with any further direction. Looking ahead, tomorrow’s calendar is thin in terms of Eurozone data, with participants now looking ahead towards tomorrow’s Jackson Hole Symposium appearance by ECB President Draghi.
GBP/USD
TIn a similar nature to that of EUR, GBP was also seen lower heading into the European open as USD strength weighed on the pair and pushed GBP/USD below 1.6600. With a lack of economic commentary following yesterday’s BoE minutes release, attention was placed upon the UK retail sales release. The release fell modestly short of expectations and subsequently provided the pair with an immediate fast money move lower of around 20 pips to reach its lowest level in around 4 1⁄2 months. Thereafter, the pair saw a paring of these earlier loses as an easing of geopolitical tensions saw USD trims its gains for the session, although GBP/USD remains set to post its 7th consecutive weekly decline. Looking ahead, tomorrow sees an absence of tier 1 UK data, with participants now looking ahead to BoE Broadbent’s appearance at the Jackson Hole Symposium on Saturday for any further clues on the future path of UK monetary policy.
USD/JPY
Asia-Pacific trade saw an extension of yesterday’s post-FOMC inspired USD gains which subsequently led the pair to break above yesterday’s highs at 103.85 with upside capped by the psychological 104.00 handle. This was a trend that was largely observed throughout the session, although USD/JPY saw a modest move higher in the latter half of trade amid unfavourable interest differential flows stemming from touted fast-money short-covering in USTs. Looking ahead, focus for the pair will largely reside with Fed Chair Yellen’s appearance at the Jackson Hole Symposium. In terms of expectations for the event some clarity from Fed Chair Yellen is expected, she is not expected to deliver any huge surprises, is widely expected to reiterate that policy will remain accommodative for a considerable period, and is not expected to clarify a timeframe for when rate lift-off will occur.
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