FX Overseas: Weekly Wrap

The release of less-than-impressive jobs report from the U.S., which weighed on the USD as well as the short squeeze that ensued following the conclusion of the press conference from Draghi ensured that the pair finished the week higher. That move higher was also driven by the scaling back of option volatility plays following the conclusion of the risk event (ECB meeting), the pair was also supported by comments from Draghi who noted that commitment to Euro is largely underestimated. Still, the Euribor curve flattened after ECB's Draghi said that monetary policy stance will remain accommodative for as long as needed and noted that while that economic activity has extended into the early part of the year, a gradual recovery is projected for the second half of this year, albeit with downside risks. In terms of other related commentary, it was reported citing Cyprus central bank official that some capital controls are to be eased. Cyprus eased daily transaction to EUR 25000 per account from EUR 5000, also raised limit on check payments to EUR 9000 per month and applied third decree on controls for two days according to Cyprus Finance Ministry. Separately, press reports late Friday suggested that Greece public sector restructuring said to be incomplete due to delays in implementation and the full Troika report on country likely to be delayed.

GBP/USD
Similarly to EUR/USD the pair finished the week with modest gains, largely driven by a weaker USD as market participants reacted to the release of weaker than expected jobs report from the BLS. Of note, the BoE voted the keep both interest rate and the Asset Purchase Facility (APF) unchanged, however the underlying trend remains bearish and there is a risk of another leg lower in the near future should the macroeconomic data fail to improve. Technical support levels are seen at 1.50227, the March 20-low and then 1.4832, the March 12-low.

USD/JPY
The pair settled the week sharply higher and traded above the 97.00 handle for the first time since August 2009 after the BoJ introduced the so-called quantitative qualitative easing, pledged to buy JPY 7trl of bonds per month. 40-year JGBs are now eligible for bond purchases and the BoJ are to double the holdings of JGBs and ETFs in two years, with the aim of increasing the monetary base at an annual pace of JPY 60-70trl. Interestingly, even though Japanese stocks rallied to fresh multiyear highs following the announcement, bond yields dropped sharply on long-dated JGBs the following day. Borrowing costs on 30-year bonds have now fallen 30bps over the past couple of days to the lowest since at least 2006. Of note, Moody's said it sees risks in Bank of Japan's new easing policies over the long-term.