GBP/USD
GBP stole all the headlines during today’s session following the latest YouGov survey for the Scottish Independence vote which had the ‘Yes’ campaign on 51%, with the unionists on 49% — overturning a 22-point lead for the Better Together campaign in the space of a month. The aftermath of this shift in the vote saw GBP/USD trade over 200 pips lower at its lowest level since November 2013 and 1-month volatility seeing its largest jump since 2008. Goldman Sachs explained that a 'Yes' vote may lead to increased economic uncertainty, financial volatility and fiscal risk post-separation, thus potentially delaying the BOE’s rate hike, a theory which was evidenced across UK Gilts and the Short-Sterling curve. Despite, some other opinion polls suggesting that the ‘Yes’ vote had not actually taken the lead in their sample, the growing concerns for the possibility of an independent Scotland dictated the bulk of price action across FX markets, with Morgan Stanley suggesting that GBP/USD could fall to 1.4600 in 12-months should the ‘Yes’ vote prevail. Looking ahead, BOE’s Carney is due to speak tomorrow and also testify in front of the Treasury Select Committee on Wednesday in regards to the August inflation report but will most likely face questions over Scotland and the Pound. It may be the case that we see unscheduled commentary from the BOE ahead of that.
EUR/USD
In the aftermath of last week’s decision by the ECB’s governing council to go against the grain of market consensus by cutting all three of their key interest rates by 10ps and announcing an ABS programme, EUR/USD continued to ebb lower in the early stages of trade. However, events in the UK then dominated the price action with a lack of pertinent economic commentary or tier 1 data from the Eurozone to provide any further direction. The bout of GBP weakness saw EUR/GBP print its largest one-day gain since January 2013 and break above its 100DMA at 0.8037, a move which saw Barclays close out its position in the cross as fears of an independent Scotland continue to mount. This move higher in EUR/GBP subsequently filtered through to EUR/USD with the pair paring earlier losses to trade at largely unchanged levels. Looking ahead, attention turns towards any comments by ECB’s Nowotny after-market.
USD/JPY
Overnight USD/JPY held above the 105.00 handle following a disappointing Japanese GDP reading (GDP Annualized SA (Q2 F) Q/Q -7.1% vs. Exp. -7.0% (Prev. -6.8%), which marked the worst contraction since Q1 2009. Thereafter, the pair moved steadily higher throughout the session with a lack of further pertinent newsflow for the remainder of the session with price action dictated by the broadly stronger USD and US leveraged names said to be buying the pair. In terms of investment bank commentary, Morgan Stanley lowered their USD/JPY forecast to 109 from 113 for Q2 2015 and to 110 from 115 for Q3 2015. Looking ahead, attention now turns towards the BoJ’s minutes release overnight, although the release is expected to largely be a non-event after the BoJ stood pat on their monetary policy at their last meeting which was broadly in-line with market consensus.