EUR/USD traded in a relative range after mixed Eurozone PMI releases

GBP/USD

Overnight GBP was the notable outperformer in the major FX space following the conclusion of the Scottish referendum with markets focusing on fundamentals of the UK economy and future policy of the BoE. However, the pair then slipped into negative territory following reports that the US treasury have announced a ruling that looks to limit the extent to which US companies can benefit from tax inversion deals and as such lessens the demand for UK takeover targets and GBP. However, these losses where then pared as the USD-index slipped away from its highest level since July 2010 (printed yesterday) following the move lower in equities which subsequently supported fixed income products and lowered US yields, making the USD less attractive.
Thereafter, GBP/USD then pared these gains to return to flat as the US came to market and pushed US yields back towards 2.55%. Looking ahead, tomorrow sees a lack of tier 1 UK data or BoE speakers.

EUR/USD

The main focus for the pair today came in the form of the Eurozone PMI releases given the recent absence of tier 1 Eurozone data. However, the French and German figures presented a relatively mixed picture, with direction instead stemming from the move higher in EUR/GBP and broadly weaker USD which subsequently provided the pair with a boost. Thereafter, the pair traded in a relatively rangebound manner with a lack of further newsflow to drive price action. In terms of the latest investment bank rhetoric, analysts at Goldman Sachs believe that Draghi is to downplay the first TLTRO and keep the door open to QE, adding they expect ECB to hold policy steady at October 2nd meeting after unveiling new stimulus in Sept. Looking ahead, attention for the Eurozone turns towards tomorrow’s German IFO survey, with the headline business climate figure expected to fall to 105.8 from 106.3.

USD/JPY

Against the grain of recent trade, USD/JPY started the European session out in negative territory as equities traded lower on both sides of the pond, weighing heavily on USD/JPY which subsequently broke the 108.50 handle to the downside. Interest differential flows were the main driving force in the first half of European trade with JPY prospering as a result and out-muscling its major counterparts. However, as the US came to market, most asset classes saw somewhat of a turnaround and as such fixed income products pared their earlier gains and higher US yields subsequently saw a reversal in USD/JPY with the pair returning to relatively unchanged levels. Looking ahead, attention turns towards tomorrow’s Japanese manufacturing PMI release, US new home sales and any comments from Fed’s George and Mester.