Forex Wrap: GBP/USD Rises Following UK Jobs Report

EUR/USD
The pair settled the session lower after the BoE brought forward likelihood of 7% jobless rate to 2015 Q3 which in turn resulted in an aggressive move lower by the EUR/GBP as market participants speculated of an earlier than previously envisaged rate hike by the Bank. In terms of Eurozone related commentary, German government advisers said that they see German 2013 GDP at 0.4% and 1.6% in 2014 vs. Exp 2013 GDP of 0.5% and 1.70% in 2014. In other news, German trade surplus was again a hot topic after José Manuel Barroso launched an inquiry into whether Germany’s large current account surplus is harming the wider European economy. However Germany itself has rejected criticism of its trade surplus and stated that other countries should make their economies more competitive. Towards the end of the session ECB’s Praet said negative deposit rate and asset purchases are options if needed , this did little in the way to move the pair initially. However, the EUR/USD did continue its decline following these comments as it offers further insight into the possible path of future ECB policy.

GBP/USD
The pair finished the session higher after the release of better than expected UK jobs report, as well as the release of the latest Quarterly Inflation Report, where the BoE brought forward likelihood of 7% jobless rate to 2015 Q3, cuts forecast for near-term inflation on lower data and GBP. In turn this led to immediate bear steepening of the short-sterling curve as market participants reassessed future interest rate path. In spite of what at first appeared to be a hawkish opening statement, BoE's Carney said that constant rate scenario shows potential advantages of keeping rates unchanged after hitting 7% unemployment. He also did not rule out lower jobless threshold to 6.5% from 7.0%.

USD/JPY
The pair finished the session lower, as market participants booked profits following the recent surge and partly due to the softer EUR/JPY cross, which itself was a product of a lower EUR/GBP which fell sharply following the release of the latest Quarterly Inflation Report. In terms of Japan specific commentary, BoJ's Miyao said he won't rule out any steps in advance if BoJ were to act again. He also added that Japan economy is recovering moderately and focusing somewhat more on downside risks to Japan economy. From a technical perspective, the pair is now trading well above its 50 and 100 DMA which it broke through last week.