EUR/USD
Following on from yesterday’s risk-on session, today saw a continuation of the theme with a lack of geopolitical commentary to alter participants risk appetite. Today saw the release of a host of broadly better than expected services PMI readings from the Eurozone with the German, Eurozone and Italian releases printing their highest levels since 2011. However, participants managed to shrug off this positive reports as focus very much remains upon tomorrow’s ECB rate decision with analysts split over whether the central bank will cut rates tomorrow given the mounting concerns of disinflationary pressures in the area. Although analysts at Goldman Sachs believe it is too early for the ECB rate to cut rates and are instead seeing April as a more likely opportunity for the central bank to act. Nonetheless, as concerns over the Eurozone continue to mount EUR could be placed under further pressure.
GBP/USD
GBP was one of the notable outperforming currencies across today’s session following an amalgamation of a receding of geopolitical concerns and stronger data from the UK. As discussed above, following on from yesterday’s comments from Russian President Putin regarding the use of military force will only be a last resort, there was little else in the way of the rhetoric that acted as a catalyst for political concern and thus failed to see USD benefit from a flight to quality. Today saw the release of a marginally better than expected services PMI from the UK, which in combination with Monday’s better than expected Manufacturing PMI saw an increased appetite by participants for the UK’s currency. Looking ahead, attention now turns to tomorrow’s BoE decision which is expected to show no change to the bank’s monetary policy, however the release is believed to be accompanied by a statement detailing gilt purchase operations for the maturing 2.25% 2014 bond.
USD/JPY
As has been a common theme across FX markets and as discussed above, price action across FX pairs was largely controlled by the risk-on sentiment relative to the past few sessions and thus saw JPY trim some of its recent strength and lead the pair higher. With little in the way of macroeconomic data out of Japan today and markets shrugging off the lower than expected US ADP Employment figure, the de-escalation of political tensions surrounding the Ukraine situation was a key influence for the pair. In terms of economic commentary, today did see some comments from sources saying the BoJ is expected to maintain overall economic assessment and may mull cutting view on exports next week. Looking ahead attention will now be turning to the host of upcoming risk events with Friday seeing the release of the US Nonfarm Payrolls data (Exp. 150K) and Unemployment Rate (6.6%).