Talking Forex: GBP Held On To Gains

EUR/USD
The pair finished the session in negative territory with volumes remaining light heading into the Christmas period and FOMC decision later today. This morning saw the release of the German IFO data, with the business climate component coming in alongside expectations but did little to provide markets with a reaction for EUR. Later in the session there was market talk of a Middle Eastern name selling EUR which put downward pressure on the currency amid easing liquidity conditions as rates ticked lower. Looking ahead the key focus for today’s session is the FOMC decision. Despite there being recent speculation from the likes of Goldman Sachs saying that they see the first Fed tapering move, more likely in March with the current case for tapering mixed on basis of data since Oct.

GBP/USD
With GBP being one of the outperforming currencies for the session, the pair managed to hold onto the gains following the release of a plummeting UK ILO Unemployment rate which came in at 7.4% vs. Exp 7.6%. The fall in the unemployment rate moves the BoE ever closer to the threshold for which they will consider an adjustment to monetary policy. Today also saw the release of the BoE Minutes, which came in alongside expectations with a 9-0 vote in favour of maintaining monetary policy. However, an interesting comment from the release was the comment that ‘substantial GBP gains would weaken recovery’. Looking ahead for the pair, the FOMC decision will remain the key focus for market participants.

USD/JPY
USD/JPY finished the session in positive territory amid a weakening JPY amid commentary from Japan, with sources saying the BoJ are to see significant room for ramping up bond purchases, but hasn't made any decision to accelerate bond purchases. As was the case yesterday there was said to be a very large option expiry in USD/JPY at 103.00 ahead of the NY cut with a size of USD 3bln, which acted as a guide for price action. Furthermore, there was also market talk that Nomura established a fresh long position in USD/JPY from 102.70 with a target of 106.00. Looking ahead for the pair, as has been the case throughout the week, the next source of guidance for the pair is likely to be provided by the widely anticipated FOMC decision.