USD Shows Weekly Gain Of 3%

This week has seen the USD index buoyed by a pickup in US data with US Housing Starts and US Building Permits, but more notably positive US CPI helping the greenback to trade back above the 96.00 handle to show a weekly gain of 3%. The Fed Minutes suggested that the a rate hike at the June meeting was all but unlikely, but this week’s strong data reading has helped the USD shrug off the FOMC minutes inspired losses on Wednesday.

Elsewhere, ECB Coeure stated the ECB would front load QE purchases before the illiquid summer months, and said theoretically negative interest rates could still be in the cards, which sent instant pressure through EUR on the break below 1.1200. In regards to Greece, many officials have said that an extension of the current bailout terms will not occur at the Riga Summit, while Greek Finance Minister Varoufakis has also made that same assertion. On Friday, sources indicated that German finance minister Schaeuble brought up the feasibility of creating a Greek parallel currency, which sent modest pressure into EUR/USD; however, the German Finance Ministry later refuted those claims. Overall, discussions are looking to be progressing at a slow pace, with positive comments from a Greek government spokesman stating that a deal with Greece's creditors could be finalised within the next 10 days, and that they aim to meet all of its debt obligations in June.

From a UK perspective, UK CPI entered deflationary territory for the first time since 1960, which saw the pair plummet close to 200 pips to print a fresh one week low. However, Wednesday’s surprisingly hawkish BoE minutes indicated that two members on the committee stated that their decision was finely balanced between pushing for a rate hike and keeping rates on hold, which supported GBP/USD following yesterday’s lacklustre CPI reading.

Looking ahead, US and European participants come back to market on Tuesday due to the market holiday on Monday, while the highlights from next week’s economic slate include UK and US GDP, BoC rate decision and Japanese CPI.