USD/JPY pair failed to benefit from the risk on sentiment

EUR/USD

The release of somewhat uninspiring German IFO survey, as well as dovish commentary by various ECB members ensured that the pair underperformed its major peers today. In particular, the pair came under selling pressure after ECB's Makuch said that a number of members of the ECB governing board are prepared to take decisive steps if needed; adding that the ECB has many possibilities, one of them is adding liquidity. He also went onto say that “there are higher deflation risks in Eurozone and that's why we are preparing additional non-standard measures to avoid deflation environment”. These comments followed somewhat dovish comments by the uber hawk of the ECB Weidmann saying that interest rates still appropriate and that negative rates could counter impact of strong EUR.

GBP/USD

Weaker EUR as a result of factors mentioned above, as well as marginally higher than expected UK RPI data meant that the pair was able to capitalise on EUR weakness and trend higher as a result. In terms of UK macroeconomic data releases, the ONS said that inflation rate in the UK fell to a to fresh four-year low of 1.7%, pushed lower by falling petrol prices. The ONS also said the price of clothing and footwear had also increased at a slower pace than the same period last year, and energy bills also had a downward effect on inflation.

USD/JPY

The pair failed to benefit from the risk on sentiment, as the stubborn price action by USTs which also remained better bid ahead of the 2y note auction by the US Treasury, together with a weaker EUR, offset JPY weakness elsewhere. There was little in terms of Japan specific news flow and the price action overnight was also somewhat muted as accounts remained on the side-lines ahead of the fiscal year-end.