EUR/USD
The pair saw a relatively rangebound start to the session as the lower than expected Spanish retail sales report and broadly in-line German import price index failed to provide the pair with any direction. Thereafter, the pair trended lower throughout the session following expectations of an uptick in excess liquidity in the Euro-area which subsequently weighed on the joint-bloc currency. Following today's higher than expected 7-day MRO allotment, analysts at Commerzbank expect excess liquidity to rise above EUR 160bln in the coming week, depending on the result of tomorrow's 3-month LTRO. Part of the expected rise is due to the fall in autonomous factors and the fall in excess reserves, which are expected to drop quite substantially, if the outstanding amounts in today's 7-day MRO and tomorrow's 3-month LTRO are rolled completely. These concerns completely outweighed the move higher in EUR/GBP stemming from month-end buying in the cross by corporate names, thus ensuring EUR/USD finished the session lower. Looking ahead, all eyes tomorrow will be on the German CPI releases, however this could largely be outweighed tomorrow by the ADP employment change release and FOMC rate decision.
GBP/USD
Following the European open, all eyes for the pair were on BoE’s Broadbent who was due on the speaker slate, however his comments failed to provide any insight into the BoE’s future path of monetary policy and as such failed to bring the pair anything in the way of a reaction. Thereafter, the pair continued its recent downtrend as prices remained below the 1.7000 handle with corporate names buying EUR/GBP adding to the downside for GBP/USD and saw the pair move near its lowest level in 5 weeks. In terms of investment bank commentary, Commerzbank said that GBP/USD has topped out at 1.7195 and they are looking for losses back to 1.6905. Looking ahead, tomorrow sees an absence of tier 1 UK data or economic commentary and thus price action for the pair may be dictated more by events stateside.
USD/JPY
Overnight, the pair was led higher by the USD index as it extended its gains above the 81.00 handle, which consequently led USD/JPY above 102.00. However, these gains were then pared in the early stages of the European session alongside the move higher in Bunds and USTs which in turn prompted unfavourable interest rate differential flows for the pair. However, a pick-up in risk appetite as the US entered the market following some strong earnings from large cap. US companies which brought on a bout of JPY weakness. This subsequently then saw USD/JPY break back above 102.00 handle, its 100DMA seen at 102.05 and make its way towards its 200DMA 102.10, thus ensuring the pair finished the session in positive territory. Looking ahead, as has been the case throughout the week, all eyes for the pair tomorrow will be on the ADP employment change figure and FOMC rate decision.