Talking FX: EUR/USD Moves Down

EUR/USD
After a host of ECB speakers heard over the weekend and USD strength cultivated by a flight to quality on the back of Ukrainian concerns, EUR/USD moved to the downside. ECB comments over the weekend took consensus that the EUR is too strong and that the central bank is ‘ready to unleash new unconventional monetary policy in a bid to fight low inflation’, with ECB President Draghi saying that ‘further strengthening of the EUR would warrant further action by the ECB, including non-standard measures such as quantitative easing’. This downward pressure from central bankers weakening EUR, coupled with a re-emerging situation in Ukraine led the EUR to test its 21 DMA at 1.3806. Looking ahead there is little in the way of risk events tomorrow, the attention now turns to the Eurozone CPI on Wednesday.

GBP/USD
GBP/USD has passed the European session muted although steadily ticking downwards, with little news flow to aid in its movement, as macro risk events slowly strengthen the USD. The Ukrainian pressure seen in other pairs has not filtered through to GBP. The stronger USD has made little headway into the impressive gains GBP made last week with GBP also supported by EUR/GBP through the European session, which broke below its 50 DMA. Looking ahead, participants await the release of the UK CPI reading tomorrow.

USD/JPY
USD/JPY is seen to be under similar conditions as above, with light news flow, and particularly stronger USD, itself a result of flight to quality and weaker EUR. However the move today has been steady and gradual, with positive US Retail sales doing little to speed up the march. The flight to quality saw USD/JPY stable as a weaker EUR conspired to keep the USD strong, and at the same time EUR/JPY low, with the two pairs cancelling USD/JPY out. Looking ahead participants expect the release of the Fed discount rate minutes and US CPI readings tomorrow.