USD spends much of the day in positive territory, with participants looking ahead to key risk events later in the week, including ECB rate decision and US nonfarm payroll report
The week kicked off with the USD dictating play as the greenback initially saw gains against most major counterparts. Central bank policy divergence comes to the fore this week ahead of the ECB rate decision on Thursday, and as such EUR spent the majority of the session softer against the USD and the pair below the 1.0600 level, with many participants expecting a minimum of a 10bps deposit cut out of the ECB. The anticipated action by the central bank overshadowed the most notable European data of the day, with German national CPI showing a reading in line with expectations (Y/Y 0.40% vs. Exp. 0.40%).
Policy divergence was also seen as one of the reasons behind the move lower in GBP/USD, whereby the pair moved below the psychological 1.5000 handle, thereby breaking below a touted DNT structure (1.50-1.55). This came after dovish comments over the weekend from the newest member of the BoE MPC member Vlieghe. However later in the session, GBP/USD pared its losses to break back above the 1.0500 handle, as the USD came off its highs on the back of Chicago PMI, which printed below the bottom end of the expected range (48.7 vs. Exp. 54).
Away from the USD, price action was relatively muted with the exception of the SEK after the latest GDP reading printed significantly higher than expectations (Q/Q 0.8% vs. Exp. 0.40%), while in terms of antipodean currencies, AUD/USD spent much of the session around the 0.7200 level where a large option (2.2bln) rolled off at the 10am NY cut, before moving higher in tandem with the move seen in commodities.
Looking ahead, tomorrow sees central bank rate decisions from the RBA and RBI, as well as a host of manufacturing PMIs from across the globe, unemployment data from Germany and the Eurozone, Canadian GDP and US construction spending and ISM manufacturing.