GBPUSD: The main event for the pair today was naturally the BoE minutes

EUR/USD

With a lack of tier 1 data on offer for Eurozone participants to digest, price action for the pair was largely dictated by a combination of events elsewhere and a few technical factors. In the early stages of trade, price action for the pair was largely dictated by movements in the USD index and the broadly weaker GBP heading into the BoE minutes release which provided further upside for EUR/GBP. However, this momentum was relatively short-lived following the resurgence in the GBP after the BoE minutes release which saw EUR/USD fail to break above 1.2548 on two separate occasions. Nonetheless, in the latter half of the session with little else on offer from a macro perspective, the pair managed to stage a technical break above this earlier high to trip stops through 1.2550 and thus cement the pair’s position in positive territory. Looking ahead, tomorrow sees the release of a host of Eurozone PMI figures which are generally expected to reveal a rosier picture of the area’s economy than previous.

GBP/USD

The main event for the pair today was naturally the BoE minutes, which saw the pair ebb lower in the early stages of trade as participants were positioned for a more overtly dovish release given last week’s QIR. Some had speculated that there could be an 8-1 vote split given the recent shift in UK economic fundamentals, however, this speculation failed to bear fruition with Weale and McCafferty still firmly in favour of rate lift-off. Furthermore, particular focus was paid to the comments that a tighter labour market is likely to lead to wage growth soon and the fact that the MPC majority said there is a risk of inflation overshooting the 2% target. As such, following the less dovish than anticipated release from the BoE, GBP/USD surged higher away from it’s Sept 2013 lows in a fast-money move of around 50 pips to place the pair firmly in the green. Looking ahead, attention will be on tomorrow’s UK retail sales numbers with the headline ex-auto M/M Exp. +0.3% vs. Prev. -0.3%.

AUD/USD

Once again AUD was a key source of price action for FX markets, with AUD being placed under further pressure to the downside. More specifically, the pair was placed on the backfoot from the offset as the Asia-Pac session saw its first opportunity to digest the continued jaw-boning of the currency by RBA governor Stevens who warned of further declines in AUD. In addition to this, AUD also felt the squeeze from the continuing decline of iron prices with Dalian iron futures hitting a second consecutive record low, as spot prices fell below the USD 75 per tonne level for the first time since June 2009. This comes in the backdrop of a continuing slew of weak data points from China including yesterday’s lacklustre housing data as well as the waning demand for equities in the HK-Shanghai stock connect. Furthermore, the move to the downside was also said to be exacerbated by cross-related selling in AUD/JPY heading into the Tokyo fix. Looking ahead, focus for the pair will be placed on the Chinese HSBC manufacturing PMI which is expected at 50.2 vs. Prev. 50.4 given Australia’s close ties to the Chinese economy.