EUR/USD
There was little in terms of EU specific commentary this week which meant that the price action by the pair was largely driven by non-EU specific factors. Specifically, despite underperforming vs GBP amid monetary policy divergence, the pair finished the week marginally higher, benefiting from a weaker USD following somewhat dovish FOMC rate decision. In terms of the EUR/GBP, the cross remained under pressure in spite of somewhat mixed UK data and policy specific events, however the underlying theme of policy tightening in the UK vs. loosening by the ECB resulted in the 10y UK/GE bond yield spread touching on its widest level since mid-1997.
GBP/USD
Despite starting the week on a back foot, the pair finished the week in positive territory, albeit marginally, as a weaker USD and the outperformance vs EUR offset somewhat mixed UK macroeconomic data and dovish MPC minutes. In term of macroeconomic data, this week saw the release of less than impressive retail sales report, which the ONS said was boosted by sales of replica football shirts, while lower fuel prices were driver of overall prices lower. At the same time, UK CPI came in at its lowest level since October 2009, with the ONS noting that the largest downward contributors to CPI rate were air and ferry fares, food and clothing. Crucially, the minutes release revealed that the MPC voted 9-0 to keep rates unchanged and also refrained from revising down slack estimate, which in turn was perceived to be more dovish following the hawkish comments by Carney last week. Nevertheless, in spite of this the pair reversed losses later in the week and rose to its highest level since October 2008 as USD weakness following FOMC proved to be an overriding factor.
USD/JPY
Despite recovering during the closing stages of the week, the pair finished lower, as the release of higher than expected US CPI was subsequently overshadowed by somewhat dovish FOMC rate decision where the Fed failure to deliver any hawkish surprises and instead lowered its long-run view of the Fed Fun Rates. As a result, the USD index moved below its key 200DMA line and prompted unfavourable interest rate differential flows. There was little in terms of Japan specific commentary, but it is worth noting that Moody's said China property market downturn to be prolonged and China drop in property sales and construction may hurt GDP.