Forex Daily Wrap: GBP/USD Under Selling Pressure

Overnight, SGD rose the most in 2-weeks after the Singapore central bank refrained from monetary policy easing, after keeping the SGD NEER policy band slope, width and center unchanged. Subsequently, USD/SGD fell by over 100 pips amid hefty position cutting led by Asia-based banks, which consequently weighed on the USD. Elsewhere, JPY strengthened for a 3rd day which saw EUR/JPY test its lowest level since June 2013, buffeted by yesterday’s comments by PM adviser Hamada.

Today’s session saw some relatively aggressive price action across pairs. During the European morning, the UK CPI release saw GBP/USD come under selling pressure as participants focused on the Core Y/Y reading which came in at 1.0% vs Exp.1.2%. Separately, EUR/PLN broke below 4.0000 for the first time since August 2011, led by the recent trend lower seen in EUR, which substantiated analysts’ expectations for the Polish Central Bank to speed up rate cuts given the continued weakness in the shared currency. Elsewhere, commodity linked currencies ebbed lower in sympathy with lower metal prices and with WTI and Brent crude futures declining ahead of the North American entrance. Also, JPY pared back most of yesterday’s gains after Japanese PM Adviser Hamada clarified that his comments yesterday referred to the PPP rate and not the current spot price in USD/JPY.

Shortly before the North American open, the USD snapped its 6-day winning streak against EUR after US Retail Sales came in lower-than-expected across all data points, despite the headline figure showing the largest rise in 2015. The move was further exacerbated after the IMF downgraded its US 2015 growth estimate to 3.1% from 3.6%, while keeping global growth, UK and Chinese estimates unchanged, and boosting expectations for the eurozone and Japan. Broad-based weakness in the USD led major pairs higher across the board, with EUR and GBP coming off multi-year lows and commodity-linked currencies further boosted by gains in oil and metals prices.

Looking ahead, tomorrow sees Chinese GDP released overnight, and while the ECB rate decision is largely expected to be a non-event, attention will fall on ECB officials’ views on the length of QE. Moreover, the slew of tier-1 data continues, with US Empire Manufacturing, Industrial Production and DoE Crude Oil Inventories all due out tomorrow. Finally, the Bank of Canada will announce their rate decision alongside their monetary policy report.