EUR/USD
The pair finished the session in positive territory despite a lower than expected CPI reading from the Eurozone presenting a further headache for ECB’s Draghi. The headline estimate figure came in at 0.5% vs. Exp. 0.6% and initially pushed the pair lower by around 25 pips. However, this reaction was pared as participants reacted to the fact that lower Spain and German CPI prints last week pushed the market to factor in a lower than expected print for today’s CPI. Furthermore, ECB’s Weidmann (German, hawk) said over the weekend that the Eurozone is not in a deflationary cycle and the ECB should not overreact to a slowdown in inflation caused largely by cyclical factors which should prove temporary. This was very much against the grain of the perceived rhetoric from the central banker last week which indicated the ECB probably has consensus to take decisive steps including QE if it sees a need from increasing deflationary risks. This therefore could hint that the ECB may refrain from action on Thursday which consequently led to some strengthening of the EUR. Elsewhere, the session was a relatively quiet one for the pair with participants now looking ahead to the plethora of Eurozone PMIs and Wednesday ADP Employment Change release.
GBP/USD
Today was a particularly quiet one for the pair and as a result neither GBP nor USD was able to out-muscle the other with both USD and GBP weaker against the EUR following the aforementioned post-CPI strengthening of the currency. In terms of macroeconomic releases, today did see the biggest increase since August 2012 in UK M4 Money Supply and the first fall UK Mortgage Approvals since February 2013 but neither release managed to weigh upon GBP. Looking ahead, after-market does see BoE Governor Carney on the speaker slate, ahead of tomorrow’s UK Manufacturing PMI. However, events in the Eurozone and Stateside with the Nonfarm Payrolls release this week could overshadow developments in the UK before next weeks BoE Rate Decision.
USD/JPY
The pair saw considerable gains throughout the session with USD benefiting from interest differential flows. Today’s session saw an increase in risk sentiment following reports that US Secretary of State Kerry said the US and Russia agree to work to ease Ukraine crisis and made suggestions to de-escalate tensions over Ukraine and talked about a drawdown of Russian troops. As a result, T-notes fell throughout trade and saw inflows into USTs. In Japan, participants did see a disappointing Japanese Industrial Production release but this failed to add much in the way of guidance towards the pairs price action. Looking ahead, tomorrow does see the implementation of the Japanese sales tax hike, which could be of importance to participants with some analysts saying the hike could pose some strain on consumption as the nation attempts to reduce its heavy debt burden.