Overview
In what has been a relatively muted session in the FX market, major pairs traded in a relatively tight range as participants await Wednesday’s FOMC rate decision with investors seeking further clarity on whether a June rate hike is completely out of the question. The relatively unmoved USD index managed to reside comfortably above 97.00 for much of the session until the release of the lacklustre US Service PMI (M/M) 57.8 vs. Exp. 58.8 which sent the USD back below its 97.00 handle and enabled EUR/USD and GBP/USD recover all of its earlier losses. Sentiment in the eurozone was buoyed after reports in German newspaper Bild suggested that the Greek government had amended its reforms list and plans to present them at Wednesday's eurozone meeting.
In Asia, continued rumours surrounding the PBoC suggested that the central bank could conduct a QE programme put USD/CNY on track for its largest fall since late February as the world’s second largest economy attempts to combat stuttering growth. Elsewhere, volatility was observed in USD/JPY after Fitch downgraded Japan to A from A+ which saw the pair spike higher by 27 pips above 119.40, only to give back those all of those gains with the impending BoJ rate decision scheduled on Thursday. Heading into the European close, AUD/USD broke out of its 20 pip range to reach highs above 0.7850 after tripping stops through overnight high amid strength in commodity prices.
Looking ahead, tomorrow’s data slate sees the release of Japanese Retail Sales, UK GDP, US Consumer Confidence, API crude inventories as well as comments from BoC Governors Poloz and Wilkins.