GBP/USD finished the week with heavy losses

EUR/USD

The pair saw a particularly muted start to the week with a lack of pertinent newsflow over the weekend for participants to digest, with EUR/USD trading in close proximity to the 1.3500 handle. However, Tuesday saw the pair break below the 1.3500 level and July’s lows (1.3491) before reaching it’s YTD low at 1.3477, with the move said to be a product of light volumes and the move higher in USD/CHF above 0.9000. Downward momentum was then exacerbated by interbank and hedge fund names said to be net short in EUR/USD. However, the move to the downside was halted by the move higher in EUR/GBP following a less hawkish than expected BoE minutes release. Thereafter, a strong German PMI release was countered by a particularly weak German IFO survey which alongside leveraged names selling EUR/USD saw the pair break below 1.3450 to reach an 8-month low and ensure the pair finished the week in negative territory. Looking ahead, next week sees the release of German CPI and jobs data, which will give participants a further opportunity to assess the fragility of the Eurozone economy and inflation concerns.

GBP/USD

In a similar nature to EUR, GBP saw a relatively muted start to the week with all eyes on Wednesday’s BoE minutes release. As was expected, the minutes revealed a unanimous 9-0 vote on keeping monetary policy on hold. However, there was no mention of any calls from BoE’s Weale and McCafferty for an imminent rate hike as some had expected and no other indications on the future path of BoE policy, with many seeing the August Quarterly Inflation Report as a more opportune time to assess the need for a rate hike. Given the unwind of hawkish bets, the pair was immediately seen lower and moved below last Friday’s lows seen at 1.7037. The negative tone for GBP was continued on Thursday as a lower than expected UK retail sales report and touted liquidation of long GBP/USD positions saw the pair move below the 1.7000 handle to see the pair post it’s 7th consecutive loss. The pair managed to stabilise in the latter stages of the week following an in-line UK GDP report but finished the week with heavy losses. Moving forward, the calendar for the UK is set to be a light one next week with the main data release being that of UK manufacturing PMI which is expected to remain unchanged at 57.7.

USD/JPY

With Japanese participants away from market at the beginning of the week, the pair saw a relatively subdued start to the week. Thereafter, the pair traded in a particularly tight range, with the move higher in USTs following the US CPI release seeing the pair dip below the 101.50 level amid interest differential flows. The majority of the price action for the pair took place on Thursday where the pair moved higher and broke out of it’s weekly range following a strong weekly US weekly jobs report which saw the pair prosper amid a reversal of interest differential flows before meeting resistance at the July 16th high of 101.79. With a distinct lack of notable BoJ rhetoric or tier 1 Japanese data, the pair traded steady for the remainder of the week and below the 102.00 handle. Looking ahead, the key releases for Japan come in the form of industrial production and retail sales. Although any geopolitical developments stemming from the news today that EU Ambassadors have asked the European Commission to draw up legal text to impose sectoral sanctions on Russia, could act as a source of price action for the pair.