FX Weekly Wrap: USD/JPY Push Higher

EUR/USD
After being relatively range bound, broad-based USD strength on Wednesday ensured the pair finished the week in negative territory. At the start of the week EUR/JPY inspired losses alongside a better bid in EUR/GBP saw a steady start for the pair with little in the way of economic commentary or macroeconomic releases to act as a guide for price action. One of the key pieces of commentary came from Fed’s Fisher and Plosser who struck a hawkish tone by saying they both see an end to the Fed’s QE programme in late 2014. These comments alongside a weaker JPY saw across the board USD strength and provided the most significant source of direction for the pair. Broad based AUD weakness inspired rally by EUR/AUD in the closing stages of the week failed to offset the hawkish rhetoric provided by the Fed and thus the pair finished the week below where it started it.

GBP/USD
The pair finished the week relatively unchanged despite an-end of week rally on Friday following a significantly better than expected UK Retail Sales report. At the start of trade, GBP was one of the underperforming currencies following talk of real money selling of GBP against a basket of currencies, particularly AUD, which saw GBP/AUD print the lowest level since Dec. 12th. Despite a retracement of some of these losses, the pair was presented with further downside following the broad-based USD strength observed after the comments from Fed’s Plosser and Fisher as discussed above. However, most of these earlier losses were then retraced by a resurgence in GBP following M/M retail sales printing the joint highest reading and the Y/Y figure showing the highest reading since October 2004, which consequently ensured the pair finished the week relatively unchanged.

USD/JPY
With the Coming-of-age festival in Japan, USD/JPY initially saw some downside with Japanese participants away from market, and consequently moved below the key 103.50 level. However, when Japanese markets reopened these losses were retraced, which also saw the Nikkei 225 post its biggest one-day gain in four months, and then extended by the aforementioned USD resurgence amid talks of an end to the Fed’s QE taper programme by late 2014. Despite some of these losses being pared amid unfavourable interest differential flows, it was not enough to negate the upward momentum for the pair.