EUR/USD
Following last week’s NFP inspired losses, the pair started the week on the backfoot following a weak German industrial production release (-1.8% vs. Exp. 0.0%). This followed comments from ECB’s Lautenschlaeger who said she absolutely does not see bond-buying on the horizon adding that bond-buying would only be an option if the ECB faced extraordinary risks, however these comments failed to grant the pair much in the way of direction. The post-industrial production weakness was largely capped and ultimately reversed ahead of a slew of option expiries between 1.3600 and 1.3650, with talk of sovereign names on the buy providing the pair with further support. However, prices then met resistance at the 1.3600 handle where it resided throughout the remainder of the session. Looking ahead, attention now turns to comments from ECB’s Lautenschlaeger after-market and whether she will provide any further clarity on her comments over the weekend.
GBP/USD
Despite a distinct lack of newsflow or tier 1 data released from the UK, the pair traded lower throughout the session in a pullback from recent highs (1.7180) to break back below the 1.7150 level and towards 1.7100. Further GBP weakness stemmed from the recovery in EUR/GBP which saw the cross approach the 0.7950 level to the upside with GBP/USD then finding support at 1.7100. Looking ahead, attention turns to UK industrial and manufacturing production releases. The M/M industrial production release is expected at 0.3%, which if it does print in expansionary territory, will show the 6th consecutive gain for the release. However, analysts at HSBC note there is potential for a decline due to ongoing maintenance in key North Sea oil fields and a fall in electricity output following very strong growth in April.
USD/JPY
During Asia-Pacific trade, USD saw broad-based strength against most of its major counterparts, with USD benefitting against JPY via interest differential flows given the move lower in USTs. This consequently led the pair above the crucial 102.00 handle to break above Thursday’s post NFP highs before finding resistance at the 100DMA seen at 102.16. However, these gains were then pared and extended into losses alongside the move lower in European equities, with the move to the downside capped after finding support at the 200DMA seen at 101.80 as the pair then traded in a relatively rangebound manner for most of the European session amid light newsflow. Of note for the pair, Morgan Stanley have switched to near-term bullish on USD/JPY and expects the pair to benefit from US Treasury yields and may test 102.80-103.00 levels. Looking ahead, tomorrow sees an absence of tier 1 data from both Japan and US, although comments from Fed’s Lacker and Kocherlakota ahead Wednesday’s FOMC minutes release may provide the pair with some direction.