USD/JPY
USD/JPY started off the week on an upward trend with a recovery in stocks as the negative sentiment from Asia-Pacific trade was shrugged off. As Chinese Trade Balance figure was somewhat skewed by the different timing of the New Year Lunar period and a clampdown on fake invoicing and copper financing. Later though the pair saw losses as a flight to quality in the latter half of Tuesday’s session amid fears of a further Chinese corporate default saw JPY drag the pair lower below the 103.00 handle. Throughout the rest of the week a hangover of Chinese corporate bond default concerns remained, as traders continues to eye further weak links after Chaori Solar failed to pay back obligated debt last Friday. The end of the week saw further falls after a surprising announcement from the BoJ of a decrease in their purchases of long term maturities. Exacerbated by weaker than expected Chinese industrial production and retail sales. Which prompted several teir 1 investment banks cutting China’s growth forecast. Along with an unnerving statement from a Chinese government source to “not panic”. Enkindling fears of continuing low data coming from China, amidst increasing fears over the Ukraine crisis. Traders pricing in the dangers of Sunday’s referendum seeking the JPY safe haven with lows of 101.32 seen Friday afternoon.
GBP/USD
Heavy selling pressure following reports on Vodafone and Rolls-Royce saw a sharp drop in GBP/USD at the beginning on the week. Followed later with Carney saying that it would be best to adjust interest rates by more than 0.25% before reversing QE and that any QE unwinding, would only take place after several rate increases. With fears of a radical selling of gilt holdings softened as Carney calmed the markets which lead to a weakening of GBP. The Vodafone and Spain’s Ono continued talks kept the pair heading down throughout the middle of the week with a lack of any other tier 1 data to guide prices.
EUR/USD
Despite a steady start to the week EUR/USD saw some upsides in the first half of Wednesday’s session amid a weaker USD which was driven by a stronger JPY following demand for safe-haven assets as the Chinese Trade Balance disappointed participants. This was then followed by a small dip after some dovish statements from ECB’s Constancio saying that the financial markets misinterpreted the central bank and that they can still cut rates. This follows the recent ECB decision to keep rates on hold and not end their SMP sterilisation programme. Later on in the week the Asian-Pacific session saw EUR/USD adding to its gains after stops tripping through Thursday’s high near the 1.3915 level. This spike in volumes sent the pair to 1.3967, the highest level since late October 2011. Further supporting EUR/USD were the successful bond auctions from both the Italian and the Irish debt agencies. This was pared later on, retracing and then dropping further as geopolitical trouble in Ukraine and economic trouble in China saw US equities turned red.