GBP Attention Turns Towards UK Jobs Report And Upcoming Referendum

GBP/USD

GBP/USD started the session on the front-foot after the Survation, ICM and Opinium Scottish referendum polls all showed 48% ‘Yes’, and 52% ‘No’ among the decided voters, thus extending on the recent retracement of last week’s heavy losses. Thereafter attention turned towards the release of the UK jobs report, although despite the jobs report revealing a fall in the unemployment rate and an increase in average weekly earnings, GBP/USD remained relatively unreactive as participants remained focused on the Scottish referendum. Furthermore, the BoE minutes release as expected revealed a 7-2 split in favour of raising rates failed to provide the pair with any further direction. Looking ahead, all eyes for the pair will be firmly placed upon the eagerly anticipated outcome of the Scottish referendum. Votes are due to be cast tomorrow with results expected to be published overnight.

AUD/USD

Overnight, AUD/USD was provided initial support after reports that the PBoC is to provide an extra CNY 500bln in liquidity to China’s 5 largest banks which was said to be equivalent to a 50bps cut in the RRR, thus supporting AUD given its ties to the Chinese economy. However, the pair actually saw the session out in negative territory after comments from a PBOC adviser who said that China should stick to prudent monetary policy. The adviser added that China has not reached the point to cut interest rates, with the comments subsequently trimming the initial gains for AUD in spite of the weaker USD amid expectations for a hawkish Fed. Looking ahead, in the absence of any tier 1 Australian data, attention for the pair will turn towards any potential further clarity on what further actions/if any, the PBOC will take.

EUR/CHF

The pair traded marginally higher throughout the session ahead of tomorrow’s eagerly anticipated SNB rate decision. In terms of the decision, a vast majority of analysts and economists expect the SNB to keep rates and more importantly the vaunted EUR/CHF floor unchanged at 1.2000, adding that it remains committed to buying unlimited quantities of FX to preserve the level. While this will most likely result in EUR/CHF falling to within a touching distance of the key 1.2000 level, it is highly unlikely that markets will be able to overpower any interventions by the SNB. However, there is an outside risk of the central bank announcing negative deposit rates to counter the recently announced policy easing measures by the ECB including yet to be allotted TLTRO which have resulted in further EUR weakness. Still, response to the SNB imposing negative rates on Swiss sight deposits would lead to immediate and substantial CHF weakness.