Weekly FX Wrap: April 24, 2015

WEEKLY FX OUTLOOK: The USD's decline this week has benefitted EUR/USD and GBP/USD despite looming uncertainty in their respective nations.

The PBOC kicked off the week on the front foot after they lowered their Reserve Requirement Ratio (RRR) by the biggest margin since Nov'08 by 100bps to 18.5%. This unannounced but unsurprising move bolstered the antipodeans to touch 1-month highs, however comments from RBA Governor Stevens stating that AUD could well depreciate in due course as a lowering of interest rates has to be on the table, which caused AUD/USD to retrace all of those PBOC inspired gains. Elsewhere, NZD/USD was pressured after Assistant Governor McDermott, who all but ruled out any interest rate hikes in the near-term. McDermott also said that weaker demand and prices would prompt consideration of a rate cut.

The USD-index extended its losses on the week as a slew of weak data releases from the US continued to cast further doubts of a June rate hike. Elsewhere, Friday’s negative US Durable Goods Orders (Mar) M/M 4.0% vs Exp. 0.6%. Despite the beat on the headline number, participants were said to focus on the ex-numbers which all missed expectations and did little to provide a sustained boost in a week that has been comprised of weak US data. EUR/USD was bolstered by on Thursday after source reports from a Senior Greek Official stating that they expected positive signs from todays’ Eurogroup meeting in Riga. However, negotiations today have stalled and resulted in EUR/USD giving back some of its gains. Eurogroup’s Dijsselbloem said that there will not be any 'partial' funds available to Greece if 'partial' reforms are submitted. Discussions between the two parties broke down as the Eurogroup still deem Greece’s reform proposals as inadequate. Elsewhere, GBP/USD printed fresh five week highs on the last trading day of the week, despite continued jitters around the market ahead of the UK election in two weeks.

Looking ahead, next week sees the FOMC rate decision where market participants will yearn for further details on the current trajectory of rates and whether the series of recent weak data will deter the Fed from a rate hike in June. In terms of other highlights next week, Chinese, UK Manufacturing PMI, Japanese and German CPI, BoJ rate decision, US and UK GDP and US Services PMI.