With no tier 1 data today, the session has seen many sit out proceedings ahead of the eurogroup meeting this afternoon with the press conference scheduled for 1900GMT/1300CST. However with both sides playing hardball, it appears unlikely any outcome will be decided upon today, as suggested by Germany. Despite this, there is the potential for the war of words to continue and therefore tensions to filter out to the EUR.
The USD dictated play after the Wall St. open as the DXY broke above 95.00 to reach its highest level since June 2003, with USD/JPY breaking above 120.00 for the first time since January 5th after tripping stops at the handle where there was said to be an option barrier.
Elsewhere, the GBP has seen a bout of strength today, with EUR/GBP breaking below 0.7400 to reach its lowest level for 7 years. This comes amid touted short covering ahead of tomorrow’s BoE Quarterly Inflation Report, where some anticipate a hawkish slant to the release as the BoE may choose to interpret falling oil prices as a positive and describing it as a stimulus for growth, despite the possibility of a downward revision of CPI forecasts also as a consequence of falling oil prices. GBP strength has also propped up GBP/USD to reach its highest level of the week but failing to breaking above 1.5300.
Finally ahead of the DoE Inventories, commodity currencies CAD, MXN, AUD and NOK were lower on the day with WTI and Brent crude futures both in the red, breaking below the psychological USD 50.00 and USD 55.00 handles respectively. The commodity currency weakness was not abated after the release, with inventories showing a larger build than expected (4868K vs. Exp. 3750K, Prev. 6333K), seeing USD/CAD test 1.2700 to the upside, but failing to break above the level.
Looking ahead tomorrow sees the Riksbank rate decision, with the majority expecting rates to remain at 0%, but with 6 of the 18 analysts surveyed anticipating a cut of between 10 and 25 bps volatility is likely regardless of the decision.