Talking Forex: Greenback Traded Steadily

EUR/USD
Unlike last week when the USD came under pressure amid concerns over EM nations, the greenback traded steady and thus failed to support the EUR/USD, which finished lower on the back of touted selling of the EUR/GBP by real money accounts. Even the release of better than expected German IFO survey, together with reports citing Draghi saying that the central bank would be prepared to buy packages of bank loans to households and companies failed to lift the sentiment. Going forward, the attention will likely remain on EMFX especially after the Turkish central bank said it will hold an extraordinary meeting of its monetary policy committee tomorrow and announce the decision at midnight local time. On that note, analysts at UBS said that the timing of Turkey's central bank's statement (12pm local time) suggests something other than an interest rate adjustment and that the central bank may announce capital controls.


GBP/USD
Touted selling of the EUR/GBP by real money accounts helped support the pair, which traded higher for much of the session on Monday ahead of the key GDP report which is due to be released on Tuesday. There was little in terms of fresh UK specific macroeconomic commentary, but over the weekend BoE Governor Carney said that the BoE will not immediately withdraw stimulus upon recovery, adding that he is not signalling an exit from loose monetary policy. However, the Centre for Economics and Business Research (CEBR) expects the Bank of England to raise the benchmark borrowing rate to 1% in the final three months of 2014.


USD/JPY
Concerns over EM nations failed to boost investor demand for safe haven assets, which in turn ensured that the pair managed to remain bid and in turn recoup some of the losses posted last week. In terms of Japan specific commentary, the country has reported a record annual trade deficit after the weak JPY pushed up the cost of energy imports. Of note, imports rose 25% in December from a year earlier and exports gained 15%, leaving a monthly deficit of JPY 1.3trl in a record 18th straight shortfall.