EUR/USD traded in green supported by ECB members' comments

EUR/USD

The pair traded in the green from the get-go with support provided by comments over the weekend by various ECB members highlighting that the ECB are not currently considering outright QE, with most justifying status quo due to recent policy actions and the low efficacy of government bond buying on changes in the real economy. Elsewhere, today’s session provided a distinct lack of tier 1 Eurozone or US data and as such saw the pair trade in a relatively rangebound manner following the open, before trimming some of the earlier gains as the USD index pulled off its overnight lows. Looking ahead, tomorrow sees the release of a host of preliminary Eurozone manufacturing PMIs with participants looking towards the release for further insight into the fragility of the area’s economy. 

GBP/USD

With the debacle of the Scottish referendum out of the way now, attention for the pair returned back to the UK economy and the future path of BoE policy. With the BoE expected to pull the trigger on rate hikes before the Fed, GBP out-muscled the USD, with the USD index initially weaker at the start of the session as participants booked profits from last week’s substantial gains. Furthermore, participants shrugged off an article by David Smith of the Sunday Times who said that assuming the UK bank rate is close to rising is a mistake, with real wage rises necessary before the BoE conducts tightening. With a lack of pertinent tier 1 UK data this week, attention will turn towards any comments from BoE governor Carney who is due to speak on Thursday, with participants awaiting any further clarity regarding BoE policy, with fears surrounding Scotland having now abated. 

AUD/USD

Once again the pair was seen lower throughout the session as Chinese growth concerns remain a prevalent theme in FX markets. Overnight saw comments from the Chinese finance minister who said Chinese growth faces downward pressure, which subsequently exerted downward pressure on the metals complex with silver hitting 2010 lows, Dalian iron ore futures reaching contract lows and gold hitting YTD lows. Given Australia’s ties with the Chinese economy and dependency on mining production, AUD was seen offered from the get-go with further downside exacerbated by reports of leveraged accounts selling AUD against EUR and GBP and stops being taken out in AUD/USD through 0.8900. Looking ahead, all eyes will be on the Chinese HSBC manufacturing PMI release which is expected to fall to 50 from 50.2, with analysts suggesting that some of today’s price action was dictated by fears of a less than impressive release.