US GDP Takes Center Stage; Dollar Index Weakens

EUR/USD

With a lack of tier 1 data or notable newsflow out of the Eurozone to drive price action, the pair traded above 1.3600 and in close proximity to 1.8bln of option expiries at 1.3620/25 with all eyes firmly placed upon today’s US data releases. Today’s tertiary Q1 GDP release came in at -2.9% and far below the expected -1.8%, marking the biggest decline in the same 3-months since 2009. This coupled with a weak durable goods release (-1.0% vs Exp. 0.0%) saw the pair immediately move higher by 20 pips and cemented the pair’s move into positive territory. However, the move to the upside was halted as market participants looked ahead to the next reading of GDP (Q2) which is expected to show growth. Moving forward, once again tomorrow sees an absence of tier 1 data, although ECB’s Weidmann is due to comment at 0700BST/0100CDT.

GBP/USD

As was the case in the Eurozone, there was a lack of newsflow or tier 1 data from the UK. Nonetheless, the pair did ebb marginally lower in early trade amid selling by model-based investors triggering stops, although staged a modest recovery to trade flat ahead of the US data after shrugging off a weak CBI Reported Sales release (4 vs. Exp. 23). Upon the release of the US numbers, the pair was lifted by the broad-based USD weakness and briefly broke back above the 1.7000 handle. Looking ahead, tomorrow the Bank of England's Financial Policy Committee (headed by Mark Carney) are expected to unveil housing market reform put in place to prevent escalated housing price pressure in the near- to medium-term from creating bubble-like conditions.

USD/JPY

Overnight trade saw the pair ebb marginally lower as cautious sentiment stemming from PM’s Abe “third arrow” policy announcement was met with disappointment and consequently led the Nikkei 225 lower. The pair traded in a rangebound manner and in close proximity to half a yard of expiries at 102.00 at the NY cut. As already mentioned US GDP took centre-stage and consequently led the pair lower as the US Dollar Index weakened. Although, the move to the downside was then capped by a better than expected US services PMI release. Looking ahead, tomorrow sees no tier 1 data from Japan, therefore, focus may once again be stateside with the US weekly jobs report, personal income, and PCE data due for release.