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USD/JPY Relatively Rangebound, GBP Under Pressure

Published 08/19/2014, 10:07 AM
Updated 07/09/2023, 06:31 AM

EUR/USD

Once again today’s session has seen a distinct lack of tier 1 data or economic commentary from the Eurozone, with focus for the pair residing stateside following today’s key US data points. In the early stages of the session, the EUR/USD was placed on the backfoot as broad-based USD strength pushed the pair further below 1.3400 as the pair eyed oscillated around the 1.3350 level which was a sizeable option expiry (887mln) for the 10am NY cut. However, the main source of price action for the pair today stemmed from today’s US data releases, with the CPI readings coming in broadly in-line, the EUR/USD was guided by the better than expected housing starts and building permits releases, with the US Commerce Department saying July homes under construction is the highest since December 2008.. The subsequent USD strength saw the EUR/USD fall to YTD lows as the pair took out a touted barrier at 1.3325 and ensured the pair saw the session out in negative territory. Looking ahead, the pair is likely to continue to be dictated by events stateside with tomorrow seeing the FOMC minutes release. In terms of Eurozone data, participants will have to wait until the latter stages of the week, with Eurozone PMIs due for release on Thursday.


GBP/USD

The broad-based USD strength placed GBP under pressure in a similar nature to that of EUR as participants awaited today’s inflation data releases from the UK, with the GBP/USD moving below the 1.6700 handle. Expectations for the headline Y/Y CPI figure were for a fall from 1.9% to 1.8%, however the reading revealed a fall to 1.6% pushing the metric near the five-year low of 1.5% touched in May. This saw an immediate fast-money move lower in the pair of around 50 pips as the GBP/USD broke below its 200DMA at 1.6675 to reach its lowest level since April 8th. Thereafter, losses for the pair were further exacerbated following the better than expected housing starts. Attention now turns towards tomorrow’s BoE minutes release which is expected to show the MPC voted unanimously for no policy changes in August. However, many see an outside risk that Martin Weale and/or Ian McCafferty could have voted for a rate hike.


USD/JPY

Overnight, the pair traded in a relatively rangebound manner amid a lack of pertinent newsflow or data from Japan. Thereafter, the pair followed the general trend of the stronger USD in early European trade as the USD/JPY ebbed higher throughout the morning heading into the US data releases. The upside surprise in the US data, saw the pair extend their earlier modest gains, with the move exacerbated by favourable interest differential flows following the post-data move lower in USTs. Looking ahead, attention for the pair will likely be placed on tomorrow’s FOMC minutes release, with markets to remain focused and sensitive to further clarity on when the Fed see rate lift-off, although no big surprises are expected from the July minutes. Furthermore, the minutes release is likely to be overshadowed by Fed Chair Yellen’s appearance at Jackson Hole just two days later.

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