EUR/USD
Amid very light volumes as European participants cautiously return to market, coupled with light news flow, EUR is back above 1.3800, more as a result of a weaker USD than any other fundamental reason. With markets quiet, comments from ECB’s Coeure regarding EUR appreciation’s impact on inflation and the strength of the EUR justifying the accommodative policy were largely ignored. The continued contraction in peripheral European spreads against the German benchmark also helped to drive the currency higher ahead of tomorrow’s 10yr auction from Portugal, which is expected to pass by smoothly. In the second half of the session EUR strength, as Europe continued to come into play, led EUR/USD to print fresh session highs at 1.3825, but the pair failed to sustain the move coming off its highs. Towards the European close the USD reversed its weak position to one of strength weighing on the EUR as the pair has had little fundamental to support it, with the EUR/USD moving to test session lows. Looking ahead participants will get to digest the Eurozone PMIs tomorrow.GBP/USD
The pair out-performed its continental peer, although USD weakness supported today’s price action but did not lead it, as the European session opened after the elongated weekend. With the focus today in equities, particularly with the news that GlaxoSmithKline plan to sell their Oncology unit to Novartis, for USD 16bln, supporting GBP inflows. In the second half of the session there was also talk of Middle Eastern names buying GBP/USD, benefitting price action. These factors helped the pair move to break the psychological handle of 1.6800 on its way to print its session highs at 1.6840, close to 5 year highs at 1.6842. The late USD strength failed to weigh heavily on the pair as GBP showed resilience to hold on to its gains. Looking ahead participants will digest the release of the BoE minutes on Wednesday.USD/JPY
In the late Asia-Pacific session, JPY showed strength, inspired by an equity sell off in the Nikkei 225, as the pair moved into the red. As the European session opened the pair arrested its downside move to pass the day trading range-bound, amid light news flow and volumes, despite the USD weakness seen in USD/JPY’s peers. Later in the session comments from a BoJ source that the central bank will mull raising FY2014 inflation forecast if Tokyo April CPI is strong failed to move the pair as these comments only helped to focus attention onto the Japanese National and Tokyo CPIs expected on Friday. Some USD strength late in the European session helped the pair to break out of its range to the upside, with little in the way of resistance, retracing its pre European open levels.
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