USDJPY: The pair was led marginally higher

EUR/USD

The pair started the week on the front-foot amid an apparent reversal in risk-appetite after the Portuguese central bank announced an overhaul of Banco Espirito Santo, which saw the pair reclaim the 1.3600 handle while failing to make a break of its 100 DMA at 1.3648 to the upside. However, these gains were subsequently pared alongside the move higher in EUR/GBP and hawkish comments from Fed’s Yellen who said QE is likely to end in October and a rate hike could occur sooner. These comments saw the pair continue its trend lower amid a lack of notable economic commentary from the Eurozone as it helps to highlight the divergence in central bank policy between the ECB and Fed. These losses were then capped following a resurgence in EUR/GBP as it rose from its lowest level since Sep’14. Despite the turmoil surrounding Russia/West tensions, the pair remained supported by likely inflows into EU related assets by Russia companies, seeking to reduce the impact that sanctions will have on operations. Nonetheless, towards the end of the week, a resurgence in USD out-muscled EUR, with the pair breaking below the 1.3500 level for the first time since Feb’14. Looking ahead, next week’s main macro releases from the Eurozone come in the form of PMI data releases and the German IFO survey which will provide participants with an opportunity to assess the ongoing fragility of the Eurozone economy.

GBP/USD

In a similar nature to EUR, GBP managed to regain some ground against USD earlier in the week amid a reversal in risk-sentiment, which saw the pair head towards the 1.7150 level, as participants awaited the UK inflation report. The UK CPI data far exceed expectations of 1.6% by coming in at 1.9% and provided the pair with further upside momentum with the pair approaching the 1.7200 handle to print its highest level since Oct’08. This came as participants continued to bring forward their expectations of a rate hike by the BoE. However, this upside was short-lived following the UK jobs report as the weekly earnings ex-bonus fell from 0.9% to 0.7% to print its lowest level on record. This move to the downside was then further exacerbated by the recovery in EUR/GBP and the USD to ensure the pair ended the week in negative territory. Focus for the UK next week will be placed on the BoE minutes release with participants looking to see if there were any MPC members leaning towards a rate hike with Weale and McCafferty’s comments a key source of focus. From a data perspective, next week also sees the release of UK retail sales and PMI data.

USD/JPY

The pair was led marginally higher at the start of the week amid an increase in risk appetite in Asian stock markets, although the move was relatively limited as participants sat on the sidelines ahead of the BoJ’s monetary policy decision. However, the BoJ decision failed to grant the pair with much in the way of direction as the central bank kept rates on hold and cut their GDP forecast for 2014 as expected. The main source of price action for the pair stemmed from Fed Yellen’s testimony with her hawkish rhetoric lifting the pair above the 101.50 level. The pair then proceeded to trade in a particularly tight range until JPY saw a bout of strength stemming from safe-haven related flows amid geopolitical tensions in Ukraine and Israel with EUR/JPY falling to its lowest level since February 5th. However, these losses were largely pared amid a lack of inflammatory newsflow regarding these issues. Looking ahead, next week’s main release from Japan is that of the trade balance, which is expected to reveal a narrowing of the nation’s deficit. However, attention will also be placed on any geopolitical developments surrounding the Russia/Ukraine situation.