EUR/USD
Early EUR/USD weakness in the European session, stemming from the weaker than expected French PMI release, was countered with Eurozone Manufacturing PMI, 53.3 vs. Exp. 53.0, and German Manufacturing PMI, 54.2 vs. Exp. 53.8, beating expectations. The retracement met and surpassed pre-French PMI announced levels as the pair moved to print session highs at 1.3854. Since this move the pair traced to the downside as increasing USD strength, supplied by somewhat risk averse sentiment, weighed on the pair. After the North American open however and the release of US new home sales, which missed expectations (384K vs. Exp. 450K), the USD showed some weakness that in turn let EUR/USD finish the European session in minor positive territory but well off the highs. Looking ahead markets will digest the German IFO data tomorrow.GBP/USD
After yesterday’s late gains, GBP weakness via the slightly dovish minutes, which showed the MPC remain concerned on low inflation for an extended period, led the pair to track steadily in the red. Participants digested the BoE minutes, which did not mention the strong GBP, and showed that the MPC voted unanimously to keep rates and QE unchanged, with little enthusiasm. The release of soft CBI figures, UK CBI Trends Total Orders (Apr) M/M -1 vs. Exp. 7, later in the session, gave participants more food for thought, although failed to have any notable effect on GBP/USD. With little in the way to offer a reversal of fortunes for GBP as the session progressed the slightly risk averse move continued, despite the weakening USD. Looking ahead little in the way of tier 1 data tomorrow offers potential subdued movements for the pair, however Friday’s retail sales give participants something to digest.USD/JPY
The pair spent the day with the minor USD strength impacting its peers having little effect as the strength in JPY was the predominate factor directing the price action. Early in the day news of the failure of a Russian bond auction provided a risk-off tone for the pair, as the Russian foreign minister Lavrov outlined Russia’s intention to defend Russian speakers, with JPY benefitting strongly. As the session wore on further downside price action was seen in the pair, the catalyst to the move reportedly being fast money sales with touted bids at 102.20. Some minor paring late in the session could not be sustained though as the soft US new home sales data coupled with the sell-off in US equities weighed on the USD and conversely aided the JPY. Looking ahead participants await Japanese inflation Friday.
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