Global FX In Review

EUR/USD
Today’s session saw a continuation of yesterday’s fears over a potential further Chinese corporate default despite no new news on the matter since the rumours yesterday. In the initial stages of European trade, FX markets were relatively insulated to the risk-off sentiment with equities and fixed income products seeing more of a reaction to the latest developments in China. However, a weaker GBP did provide some support for the pair with EUR/GBP consolidating above the 100DMA. Further upward momentum was then provided when the USD-index broke below yesterday's closing price and into negative territory. Today did see a host of ECB speakers, however comments were largely a reiteration of what participants have already been presented with and as such did little to provide markets with a reaction. Looking ahead, from these comments it may be worth noting that ECB’s Praet did suggest that publishing minutes would be a positive step for the central bank in order to enhance the ECB’s communication with markets given the apparent misinterpretation by markets following last week’s rate decision.

GBP/USD
In the first half of the session FX markets saw a broadly weaker GBP with some desks attributing the move lower to the potential deal between Vodafone and Spain’s Ono. However, this is an unlikely source of price action as the deal is yet to be made. As mentioned above, EUR/GBP saw significant upside, leading GBP/USD to trade near its 50DMA. However, other than this with the UK Trade Balance being rescheduled to later in the week participants were provided with very little in the way of economic commentary or data. Nonetheless, some of the earlier losses in the session were retraced amid the aforementioned USD weakness.

USD/JPY
USD/JPY finished the London session in the red, albeit well off the lows as US market participants lifted the pair off the back of bargain hunting and surging US equities. The Asia –Pacific session saw the pair sustain losses as the Nikkei 225 followed Wall Street’s dismal performance and closed down 2.6%. As the European markets took over USD/JPY was sent to session lows of 102.55. The driver of sentiment remained a hangover of Chinese corporate bond default concerns, as traders continues to eye further weak links after Chaori Solar failed to pay back obligated debt on Friday. However, as US stock futures and copper prices recovered, US yields rose which in turn lifted USD/JPY. Price direction from here forward will likely be cemented by the Chinese Industrial Production and Retail Sales figures which are to be released at 0530GMT, expected at 9.5% and 13.5% respectively.