GBP/USD surged about the key 1.66 level

EUR/USD

After starting the week above the 1.3800 handle, the pair was served with weakness towards the latter half of the week as expectations for ECB action next week weighed on the EUR. The dovish rhetoric from the ECB began on Tuesday with comments from ECB’s Makuch who said the ECB governing council are ready to take action if necessary. However, the main focus was upon comments from ECB’s Weidmann who went against his usual hawkish stance by saying that both QE and negative interest rates were tools that the ECB are willing to use if necessary, putting EUR under heavy selling pressure. This set the tone for the rest of the week and overshadowed many of the data releases out of the Eurozone and the US. Moving forward, as can be expected the key source of focus for participants will be upon next week’s ECB decision, with analysts at Barclays suggesting that recent comments by ECB's Weidmann's indicate that the ECB probably has consensus to take decisive steps including QE if it sees a need from increasing deflationary risks, however, these risks are not seen as high enough currently. Ahead of the rate decision participants will be presented with the crucial Eurozone CPI Estimate, which is expected at 0.6% Y/Y.    

GBP/USD

Despite starting the week off around the lower echelons of the 1.6500 handle, a strong UK Retail Sales release exacerbated GBP strength and sent the pair surging about the key 1.6600 level. With a quiet start to the week in terms of releases and economic commentary, the main initial source of movement for the pair was presented on Tuesday with the higher than expected UK RPI release, which twinned with EUR weakness, started off the pair’s ascent. In terms of BoE rhetoric, Weale said that wages are starting to grow in the UK and rates will not stay at 0.50% indefinitely and thus added fuel to the fire of the issue of participants bringing forward their rate-hike expectations. However, the main single source of strength for the pair was as a result of the highly impressive UK Retail Sales release and ensured the pair finished the week in positive territory.

USD/JPY

The pair finished the week relatively unchanged as developments in the Eurozone took the focus across FX markets. On Monday, BoJ’s Kuroda reiterated the central banks stance by saying they will do whatever they can to reach their 2% inflation target, however it failed to provide the pair with much in the way of movement. The pair was pushed to its lowest level since March 19th towards the middle of the week amid JPY strength stemming from the strength in Japanese equities but ultimately this reaction failed to sustain as participants look towards the imminent sales tax hike in Japan which is due for implementation on April 1st and is an attempt to reduce the nations heavy tax burden.