EUR/USD
As has been the case in the past few days, today saw a distinct lack of notable economic commentary or tier 1 data from the Eurozone. As such, the pair traded in a particularly tigh+t range despite a bout of EUR weakness stemming from AUD strength. AUD was seen higher overnight after the Australian Q2 CPI reading came in line at 3.0%, rising at its fastest pace since 2011 which pushed the EUR/AUD to its lowest level since November 2013, while EUR/USD fell to its lowest level in 8-months. However, the move to the downside was largely capped by the move higher in EUR/GBP following the less hawkish than expected BoE minutes release. Ultimately, the pair failed to gain any substantial direction and thus continued to reside at its multi-month lows. Looking ahead, attention turns to tomorrow’s Eurozone preliminary PMI releases which will give participants an opportunity to further asses the fragility of the Eurozone economy.
GBP/USD
Focus today for the pair was largely placed upon today’s BoE minutes release. Heading into the release, the pair was seen modestly higher and moving towards the 1.7100 handle with some analysts calling for a hawkish set of minutes. As was expected, the minutes revealed a unanimous 9-0 vote on keeping monetary policy on hold. However, there was no mention of any calls from BoE’s Weale and McCafferty for an imminent rate hike as some had forecast and no other indications on the future path of BoE policy, with many seeing the August Quarterly Inflation Report as a more opportune time to assess the need for a rate hike. Given the unwind of hawkish bets, the pair was immediately seen lower and moved below last Friday’s lows seen at 1.7037 with talk of leveraged names selling the pair adding to the downside momentum. This set the tone for the remainder of the session amid an absence of tier 1 US data and thus ensured the pair finished the session in negative territory. Looking ahead, attention now turns to tomorrow’s UK retail sales release which is expected to show a rebound from the previous months figure. (incl.-auto M/M exp. 0.30% vs. Prev. -0.50%).
USD/JPY
Overnight, the pair was dragged lower and below the 101.50 level as JPY gained strength from the move lower in EUR/JPY after EUR was out-muscled by the stronger AUD. With Asia-Pacific newsflow particularly light, attention turned towards any geopolitical developments and any potential safe-haven flows into JPY. However, this did not materialise given Europe’s foreign ministers yesterday failing to agree on new sanctions against Russia and the pair failing to react to the reports of two Russian fighter jets being shot down. Nonetheless, the earlier JPY strength was later extended as the US came to market and pushed USTs higher which consequently saw JPY prosper from interest differential flows.
However, these earlier losses were largely pared as the USD index printed intra-day highs in the latter half of trade as outperformance in the US Biotech sector led stocks higher and thus saw a reversal of interest differential flows back into the USD. Looking ahead, geopolitical tensions will continue to remain a hot topic, with tomorrow seeing an absence of tier 1 data from Japan. Although, participants will have the opportunity to digest the US weekly jobs report, manufacturing PMI and new home sales.