Talking Forex: EUR/USD In Tight Range

EUR/USD
As can be expected, the focus for the pair was very much placed upon the ECB rate decision. Despite a slew of Eurozone PMI Services releases, which came in relatively mixed, the pair resided in a relatively tight range ahead of the announcement. Today the ECB decided to keep all rates on hold as expected. However, there were some outside bets placed by analysts for a rate cut today and as a result upon the news, EUR did see some strength amid an unwinding of dovish bets before largely paring the move. Following this, attention then turned to the accompanying press conference whereby initially the market appeared to react to the fact that nothing particularly new (further easing) was mentioned in the opening statement alongside the fact the ECB sees prolonged period of low inflation followed by gradual upward movement, dispelling any fears of imminent deflation. This consequently provided the pair with some upside, however these gains were then pared and extended into losses as Draghi revealed the governing council has discussed several easing type options including QE, cutting rate/deposit rate, SMP sterilisation, long term financing operations and lowering the corridor for ECB rates. This ultimately cemented the pairs price action and ensured the pair finished the session in negative territory.

GBP/USD
The main data point out of the UK today was that of the services PMI which came in lower than expected and consequently weighed upon GBP due to the importance of the services sector to the UK economy. This move consequently erased any earlier strength for the pair following rhetoric form BoE governor Carney saying interest rates could increase ahead of next general election. With the pair already trading with losses and a lack of newsflow out of the UK, the main event for the pair was that of the aforementioned ECB rate decision and accompanying press conference hosted by Mr Draghi. As already discussed, the conference proved to be EUR negative following the discussions over further easing measures, which led to board-based strength for USD with the USD index trading with formidable gains. This consequently saw USD further out-muscle GBP and saw the UK currency finish the session at a loss to that of the US

USD/JPY
Asia-Pacific trade saw a significantly weaker JPY following a record high close on Wall Street which filtered through to Japanese equities and led the pair above the key psychological 104.00 handle. The pair traded in a relatively narrow range as European participants entered the market, although did see a further extension as interest differential flows came into play. As was the case across most FX pairs, one of the main sources of price action came from the ECB announcement today which as already discussed saw a strengthening of USD and thus provided another source of support for the pair. However, in the latter stages of the session a move lower in EUR/JPY did filter through to the pair and saw a retracement of earlier gains and saw the USD/JPY finish the session relatively unchanged.