EUR/USD
Both the weekend and the session saw a distinct lack of economic commentary from the Eurozone, with today’s calendar failing to present participants with any tier 1 Eurozone data. Prices in the first half of the session were initially guided by the Carney-inspired move lower in the EUR/GBP below 0.8000 with the pair trading in a relatively rangebound manner thereafter. In terms of investment bank commentary, GS says it’s difficult to tell when the EUR/USD will be ready to turn back lower again, the fact that oscillators are back into the middle of their range implies that the market is in a far better place now to continue trending. GS adds that it seems just a matter of waiting for a clean break below 1.3337-1.3333. Looking ahead, tomorrow sees a lack of tier 1 data, with all eyes in the Eurozone now placed on Thursday’s PMI releases and Draghi’s appearance at the Jackson Hole Symposium this Friday.
GBP/USD
Last week’s QIR report from the BoE saw the central bank slash their wage growth forecast form 2.5% to 1.25% for 2014, which subsequently saw the pair add to its recent slew of losses. However, the pair saw somewhat of a modest pullback from last week’s losses following comments over the weekend by Governor Carney in the Sunday Times. The governor revealed he would not wait for real wages to turn positive before lifting the Bank rate from its record low of 0.5% adding that interest rates may have to go up before households enjoy a rise in living standards. This subsequently saw GBP out-muscle its major counterparts with the GBP/USD breaking back above the 1.6700 handle and the EUR/GBP slip back below 0.8000. This pretty much set the tone for the pair for the session with a lack of tier 1 data or notable economic commentary to guide the pair thereafter. Looking ahead, focus for the UK tomorrow shifts towards the host UK inflation data with the headline Y/Y CPI figure expected to fall from 1.70% from 1.90%.
USD/JPY
With a lack of tier 1 data or notable economic commentary from Japan or US, the pair was largely guided by the return of risk appetite following the lack of further inflammatory geopolitical developments. Reports from the weekend suggested that European, Russian and Ukrainian foreign ministers have attempted to make steps towards a ceasefire possible in eastern Ukraine. Despite no firm conclusion being reached during today’s session, the prospect of such a ceasefire saw outflows from safe-haven assets with USTs seen lower throughout the session and thus seeing USD/JPY prosper from favourable interest differential flows and break above its 200DMA seen at 102.40. This was a trend that was observed throughout the session and cemented the pair’s position in positive territory. Looking ahead, particular focus will be placed on any further geopolitical developments and tomorrow’s US CPI release. In terms of the inflation data, the headline Y/Y figure is expected to fall from 2.10% to 2.00%.