Global FX: Big Week For USD/JPY

EUR/USD
The pair finished the week in negative territory after Thursday’s session saw post-FOMC USD dominance drag the pair below the 1.3650 level. The pair started the week off positively after money markets continued to rise alongside talk of repatriation flows amid the ECB’s Asset Quality Review. Up until the FOMC there was little in the way of economic data or commentary to provide any direction for the pair, however a resurgence in the USD index did provide some momentum. The main event for the pair as mentioned was the FOMC’s 10bln taper (USD 5bln in each of Treasuries and MBS) which was largely deemed non-aggressive and was already relatively priced-in. This saw the pair dip lower by around 150 pips on Thursday and consequently provided the pairs direction for the week. Looking ahead for the pair, next week is set to be a quiet one with market closures following the Christmas holiday period.

GBP/USD
The pair settled the week with minor gains alongside in what was a somewhat volatile week for GBP/USD. The start of the week was a relatively uneventful one for the pair, with light volumes and pre-FOMC markets failing to provide much in the way of direction for GBP/USD. However, a lower CPI reading from the UK did result in some GBP weakness on Tuesday. Further from the UK, one of the most significant releases was that of the UK ILO unemployment rate which came in at 7.4% vs. Exp. 7.6% and brought the BoE even closer to their threshold at which they will consider an adjustment to monetary policy. Following this GBP positive news, the post-FOMC volatility and saw GBP/USD print a YTD high at 1.6484 but was not enough to negate the gains seen on Wednesday.

USD/JPY
It was an eventful week for the pair which saw USD/JPY printing a five-year high following the FOMC release. Until the FOMC decision there was little in the way of commentary to guide prices, however talk of several yards for expiry near 103.00 in USD/JPY did magnetise the pair towards this level. As was the case across most of the FX market, the events in the US this week dictated price action, with USD/JPY proving to be one of the most guided pairs by the taper after printing a five year high. In terms of economic commentary from Japan this week, we saw further coverage of Japan and their bond-buying program, with the BoJ saying they see significant room for ramping up bond purchases, but hasn't made any decision to accelerate bond purchases.