EUR/USD
The pair started the week off in relatively neutral territory and above the 1.2800 handle with a lack of pertinent economic commentary to drive price action. With the Eurozone PMI figures and German IFO report failing to sway the pair, attention instead turned towards the policy divergence between the ECB and Fed, which subsequently saw EUR/USD knock out option barriers at the 1.2800 handle. More specifically, participants began to speculate whether the ECB may be forced into further action in the wake of the poor TLTRO take-up, which would inevitably exert further pressure on EUR. Thereafter, the EUR further succumbed to the broad-based USD strength with EUR/USD eventually breaking below the 1.2700 level. Looking ahead, Monday sees the release of the regional German CPI figures before the main Eurozone CPI estimate figure the following day, with the headline expected to slump to a 5-year low. Next week also sees the ECB rate decision, although focus is more likely to centre around the press conference with participants awaiting any clues on any potential further easing measures from the central bank.
GBP/USD
With the Scottish referendum out of the way, attention for the pair then returned to the UK economy and the future path of BoE policy, which initially provided GBP with some mild reprieve. However, thereafter price action was largely dictated by movements in the USD index in what was a largely subdued week for the UK, with GBP failing to outweigh the broad-based USD strength which saw the index print a 4 year high. Later on in the week, BoE’s Carney was on the wires and said the point at which interest rates need to rise is coming closer, a comment which lifted the pair by around 30 pips, although was not enough to pare any of the pair’s losses for the week. Moving forward, attention will turns to UK PMI figures and any potential comments from BoE speakers as participants continue to try and factor in when the BoE will pull the trigger on a rate lift-off.
USD/JPY
This week was once again a pivotal week for the pair as movements in the USD index continued to dictate the state of play for USD/JPY. The pair started the week in a relatively rangebound manner before a period of volatility ensued in USD/JPY with markets failing to gain any sustained direction. However, towards the latter stage of the week saw a relatively substantial sell-off in US equities, with UST prospering as a result and thus lowering US yields and supporting JPY amid interest differential flows. However, this move was then largely pared as USD/JPY broke back above 109.00 following buying by Japanese based banks and in tandem with Japanese Health Minister Shiozaki who refuted reports that the GPIF was in no hurry to submit the GPIF reform bill. Looking ahead for the pair, the main event next week will be that of the monthly US jobs report with the headline figure expected to bounce-back above the 200K mark to 204K.
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