The pair finished the week higher, after the release of less than impressive NFP jobs reports by the BLS, together with subsequent talk of a think tank report opining that the Fed may postpone tapering even further resulted in broad based USD weakness. So much so that the immediate move higher following the release of the delayed NFP report saw the pair print a fresh 2013 high, breaking the high from February 2013. In terms of EU related commentary, the release of the latest German IFO survey failed to meet analyst estimates, however market reaction was somewhat muted as the focus remained firmly focused on the US.
GBP/USD
The pair finished the week relatively unchanged, as any strength gained from a weaker USD was in turn offset by upward trending EUR/GBP. In terms of UK related macroeconomic commentary, the minutes from the most recent BoE meeting revealed that the MPC voted unanimously to keep interest rates on hold. The minutes also noted that the MPC view as probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report. Also, no MPC member thought policy tightening was needed and that inflation expectations remain well anchored. In related commentary, BoE’s Bean said that the Bank’s review may go as far as setting a new lower unemployment threshold, adding that if it appears that there is still a substantial degree of slack in the economy, which can be absorbed without threatening the achievement of the 2% inflation target in the medium term, then there will be scope to maintain the existing stance.
USD/JPY
The pair settled the week lower, driven by a weaker USD and also concerns over the health of the banking system in China which in turn encouraged safe-haven related flows. There were also reports that largest banks in China have tripled the amount of bad loans written off in the first half of 2013, which consequently lifted money market rates in China and saw the one-week SHIBOR rise to a three-week high.