EUR/USD
Once again the EUR fell victim to broad-based USD strength as the US Dollar Index managed to extend it’s gains above the 81.00 handle. The USD was seen broadly-stronger today alongside the move higher in US yields, with analysts at Scotiabank attributing the move to US growth driving Fed expectations. This sentiment was further enhanced by the US Employment Cost Index (0.7% vs. Exp. 0.5%) which showed it’s largest jump since Q3 2008 with participants placing particular focus on today's release given the Fed's focus on qualitative measures of an improvement in the labour market. From the Eurozone, today saw the release of area’s CPI figures, with the headline M/M figure coming in at its lowest level since October 2009 (0.4% vs. Exp. 0.5%). However, this failed to present the pair with much in the way of direction as various investment banks had already lowered their expectations for the data heading into the release. Therefore ultimately, the pair saw the session out in negative territory below 1.3400, despite paring some losses following a particularly disappointing Chicago PMI release. Looking ahead, tomorrow sees the release of a host of Eurozone CPIs, however these releases may be overshadowed by the monthly US jobs report with the headline nonfarm payrolls number expected at 231K.
GBP/USD
Today saw an absence of tier 1 data or economic commentary from the UK, while the pair was seen lower amid the broad-based USD strength, stemming from the move higher in US yields. Overnight BoE’s Broadbent said the first rate increase should not be a 'massive shock' and rate increases are likely to be limited and gradual. Broadbent also added that it is quite possible that the GBP is overvalued and Q3 growth forecast may be revised up marginally. However, these comments were largely in-fitting with previous BoE rhetoric and thus failed to provide the pair with any direction. As has been the case over the past few sessions, GBP was also seen lower following the regular month-end buying by a major European central bank, which subsequently saw the pair approach its 100DMA to the downside; a level that it ultimately failed to break. Looking ahead, tomorrow sees the release of UK manufacturing which is expected to remain unchanged from its previous at 57.5.
USD/JPY
As was the case across FX markets, the higher US yields dictated the state of play, with the USD/JPY seen broadly higher given the pair’s sensitivity to interest differential flows and as such the pair extended its gains above the recently crossed 200DMA. The recent move higher in the pair has prompted Societe Generale to recommend buying the USD/JPY at 102.60, targeting 105.00 as US recovery moves to a firmer footing; stop on daily close below 101.70. In terms of commentary out of Japan today, BoJ’s Kiuchi was on the wires saying that he is more cautious on BoJ mainstream on price outlook and it is untrue that the nation’s corp. tax rate is to be cut by 2 percentage points. However, the comments failed to grant the pair anything in the way of direction as the movements in USTs dictated the price action. Looking ahead, tomorrow could see further movements in US fixed income products and thus the pair with the release of the US monthly jobs report.