The release of an encouraging IFO and ZEW reports from Germany, as well as the 1st LTRO redemption announcement from the ECB, which saw EUR 137.2bln repaid by 278, underpinned buoyant investor sentiment in Europe this week. Market participants also reacted positively to the fact that both Spain and its Iberian neighbour Portugal were able to tap capital markets with a syndicated bond placement. Of note, although a higher LTRO redemption amount which was announce on Friday has pushed money market rates higher, it also supported risk assets, given the perceived health of interbank lending market. In terms of technical levels, supports are seen at the 10DMA line at 1.3347, 1.3265 and then at the 21DMA line at 1.3247. On the other hand, resistance levels are seen at 1.3487, 1.3500 and then at 1.3550.
The pair settled the week lower, as persistent EUR strength supported GBP cross and in turn weighed on the pair. Also, less then impressive GDP report underpinned the uncertain outlook for the pair. According to the ONS, the fall in output was largely due to a drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field. Separately, the BoE Minutes from the most recent MPC meeting revealed that the Committee voted unanimously in favour of keeping the interest rate at 0.5%. However David Miles argued that an easing of monetary policy, in part by discouraging any further appreciation of sterling, could help the rebalancing process and avoid potentially lasting destruction of productive capacity. In other UK related commentary, the number of Britons claiming unemployment benefit posted a surprise fall in December to the lowest since mid-2011. In terms of technical levels, supports are seen at 1.5678/67 and then at 1.5600. On the other hand, resistance levels are seen at 1.5893, 1.5904 which is the 200DMA line and then at the 10DMA line at 1.5911.
In spite of coming under pressure earlier in the week as market participants booked profits following the latest BoJ meeting, the pair finished the week higher as markets remained convinced that Abe’s leadership will eventually achieve its set targets. Of note, the central bank committed to an openended asset purchases to achieve a 2% inflation target as soon as possible, but without putting a specific date on the timeframe. Policy makers also kept their key overnight rate unchanged at 0% - 0.1%. The BoJ announced the asset purchase programme can only begin in 2014 once the current programme is finished and is likely to be maintained thereafter. In terms of technical levels, supports are seen at 89.42/23 and then at 89.00. On other hand, resistance levels are seen at 91.46, 92.12 and then at 92.50.