GBP/USD
GBP began the day range bound as the markets tentatively awaited for the GDP release until GBP/USD was given support prior to the release from positive comments from BoE Governor Carney. Markets interpreted these comments as Carney hinting at a high reading as he suggested that the economy was at pre-2008 levels. The lift was short lived however as UK GDP was below expectations at 0.8% vs. Exp. 0.9%. UK GDP did not reach pre-2008 levels as markets anticipated which brought the pair back down to its earlier levels. As the European session came to an end the GBP saw late strength with continued support from the recent M&A news and EUR/GBP weakness from real money selling. Markets have a day of risk events to look forward to tomorrow with US GDP, EU CPI and FOMC monthly meeting to guide prices.
USD/JPY
USD/JPY remained relatively muted as the Japanese markets closed for Showa day. The pair could not sustain the upward trend from risk on sentiment in the early European session as poor data from Germany in the form of CPI resulted in an aggressive sell off in EUR/JPY which filtered through to USD/JPY. USD/JPY net movement remains in the green on favourable interest rate differential flows from a steepening of the US curve. Participants are now looking ahead to the BoJ rate decision overnight where the central bank is seen as likely to remain on hold in its quantitative and qualitative easing program and keep the Monetary Base Target unchanged at JPY 270tln via an annual increase of JPY 60tln-70tln.
EUR/USD
The main move in the pair today was a lower than expected German CPI, which put EUR/USD under selling pressure and resulted in the bull-flattening of the Euribor curve. The release comes ahead of the Eurozone CPI estimates tomorrow, which if it falls below expectations, will cause further flattening of the Euribor curve with possible long term implications of the implementation of QE from the ECB. Today saw the release of US Consumer Confidence, which remained on trend with the recent disappointment in US data, landing at 82.3 vs. Exp. 83.2. The data helped to buoy the pair slightly from the CPI based sell off as markets look ahead to the FOMC tomorrow, which is expected to see a further USD 10bln tapering and no interest rate change despite the recent slowdown in the recovery.