EUR/USD and GBP/USD regained some ground

EUR/USD

The pair started the session on the front-foot amid an apparent reversal in risk-appetite which saw EUR gain against USD, with the pair moving above the highs seen overnight amid flows away from JPY and thus supporting EUR/JPY. The reversal stemmed from the move higher in financials after the Portuguese central bank accelerated corporate overhaul of Banco Espirito Santo, with further upside also stemming from talk of real money buying EUR/USD. With a lack of notable economic commentary or tier 1 data to guide price action, the pair’s momentum was eventually halted after failing to attempt to make a break of its 100DMA seen at 1.3648, with the pair then drifting lower as USD clawed back some territory against the EUR. Over the weekend, ECB’s Weidmann was on the wires saying the ECB risks becoming bad bank of Euro-area if it starts buying ABS linked to loans to SMEs, adding that monetary policy shouldn’t remain loose longer than needed. However this news did little to impact prices as it is in-fitting with the central banker’s hawkish stance and follows comments made by ECB’s Lautenschlaeger who said she absolutely does not see bond-buying on the horizon. Looking ahead, attention tomorrow turns to the German ZEW Survey with the headline expectations figure expected at 28.2 vs. Prev. 29.8. 

GBP/USD

In a similar nature to EUR, GBP managed to regain some ground against USD in early European trade amid a reversal in risk-sentiment, which saw the pair head towards the 1.7150 level. Of note, the weekend's CFTC report showed that the shift in CFTC positions last week (-USD 1.5bln) could warn of a potential change in sentiment. The upside momentum for the pair was relatively short-lived with GBP seen weaker across the board with GBP/USD breaking below 1.7100 and EUR/GBP breaking above its 21DMA seen at 0.7976 with talk of real money names demand for EUR/GBP believed to assist the move. Looking ahead, tomorrow sees the release of UK inflation data, with the Y/Y figure expected to increase to 1.6% from 1.5% last month. Attention will also be placed on BoE’s Carney who is to be questioned by lawmakers on BoE monetary policy. 

USD/JPY

Overnight, the pair was led higher by JPY weakness amid the increased risk appetite in Asian stock markets and as the BoJ kicks off its 2-day policy meeting. With a distinct lack of newsflow out of Japan and the US there, was little else to guide the price action with the pair continuing its ascent throughout the session and moving above 101.50 but failed to make a break above its 50 and 200DMAs seen at 101.87 and 101.88 respectively. Looking ahead, attention now turns to the BoJ monetary policy decision where the BoJ are widely expected to remain on hold, with all analysts surveyed forecasting the BoJ to keep its Monetary Base Target unchanged at JPY 270trl at an annual pace of JPY 60trl-70trl. Also at the meeting, the central bank will also release its interim assessment of the outlook on economic activity and prices which consist of BoJ officials’ median projections for real GDP and core CPI.