USD Index Nears 2010 Highs; Yen Surges Through 108 Handle

GBP/USD

Focus once again for the UK was placed on the Scottish referendum vote with further suggestions from the polls that the unionists are the likely victors, with the carefully watched YouGov poll revealing a 52%-48% split in favour of the ‘No’ camp. From a data perspective, the UK retail sales report fell modestly below expectations although failed to place any weight on the pair with events in Scotland the key talking point. Thereafter, the GBP/USD continued to recover from its FOMC-inspired losses and thus cement its position in positive territory heading into the end of the European session. Looking ahead as to be expected, all eyes will be on the outcome of the Scottish referendum. In terms of the release, ballot boxes close at 2200BST/1600CDT, with results from each Scottish council due to be released from 0200BST/2000CDT onwards and confirmed by 0700BST/0100CDT on Friday morning.

USD/JPY

Following yesterday’s FOMC release focus was on the hawkish shift in projections which showed 14 members of the Fed now see the first hike appropriate in 2015 vs. 12 in June. This subsequently saw the USD-index soar to its highest level since 2010, thus leading USD/JPY to surge through the 108.00 handle to print a fresh six-year high at 108.95. However, these gains saw a modest paring throughout the European session as participants began booking profits on the post-FOMC rally. Overnight, the Japanese trade balance showed a smaller-than-expected deficit, although given the magnitude of the Fed release, it was largely overlooked. Looking ahead, focus will centre around any further rhetoric from the Fed (Fisher is due to speak after-market) with an absence of tier 1 data from Japan or the US tomorrow.

EUR/CHF
Today was a particularly crucial session for the pair, with the quarterly SNB rate decision due for release. Expectations were for the SNB to keep rates on hold and maintain their EUR/CHF floor at 1.2000, although markets remained tentative following last week’s reports that the central bank could consider negative rates in the face of the recent ECB policy decision. However, despite the pre-release nerves, the SNB acted as expected by consensus and kept rates on hold and maintained their floor. This subsequently saw an unwind of dovish positions and thus dragged the cross lower and around 70 pips above the 1.2000 floor. Although of note, after the decision SNB’s Jordan was on the wires saying that the central bank has not ruled out the prospect of implementing negative rates. Looking ahead, tomorrow’s calendar sees an absence of tier 1 data from the Eurozone and Switzerland.