EUR/USD
Having traded relatively range bound following some slight upside in Asian hours, the pair took a move back below the 1.2400 handle, as, on little fundamental and amid the reported leveraged buying in USD/JPY, the USD notably strengthened. EUR was provided some reprieve by an across-the-board better than expected German IFO report (Business Climate 104.7 vs Exp. 103.0), which helped the pair retrace the earlier move lower and continue its upward move. The subsequent USD weakness continued, and the pair moved to print a session high at 1.2440 heading into the European close. Looking ahead, focus turns to tomorrow and German GDP at 0700GMT.
AUD/USD
Price action for the pair in the European session has centred on the retracement of the sharp move higher on the surprise rate cut by China last Friday. Overnight, AUD outperformed underpinned by the rate cuts in China, which saw the pair coming just 5 pips shy of the 0.8700 handle, however, this moved abated heading into the European open with participants questioning the efficacy of the surprise move by China, while USD regained some ground following a technical move higher in USD/JPY. Furthermore, in the context of Australian monetary policy, the RBA over past weeks have reiterated that the AUD is high by historical standards and thus are likely to talk down the recent Chinese-inspired move higher. Additionally, another factor that was looked at by participants was the news that BHP Billiton could reduce investment in the country following the fall in iron prices, with the fall in iron prices also another dovish factor for the antipodean currency. Looking ahead, with participant awaiting RBA’s Lowe at 0905GMT/0305CST.
USD/JPY
In European trade the pair rose firmly above 118.00 handle after breaking above its overnight high at 118.01, moving quickly to session highs at 118.38. This move came on the back of early broad based USD strength, although this move was on little fundamental news, however RANsquawk sources noted leveraged funds buying in the pair. After this 50+ pip move the pair traded sideways mostly between 118.20 and 118.30, as the USD-index pulled off its highs. The pair shrugged off a miss for the US services PMI number (56.3 vs. Exp. 57.3) as participants look ahead to the US data heavy session tomorrow and on Wednesday, with US GDP a particular highlight. However, looking ahead the BoJ minutes at 2350GMT are the next key event for the pair, particularly as these are the minutes of the meeting at which further stimulus was decided, with BoJ‘s Kuroda’s speeches at 0100GMT and 0400GMT likely to be closely followed.