Overnight, the main focus for FX markets was AUD in the wake of the latest RBA policy announcement. In-fitting with consensus, the RBA kept rates on hold at 2.00%, however, the outside calls for a rate cut heading into the release were subsequently unwound and prompted strength in AUD, with the RBA otherwise striking a relatively neutral tone and downplaying some of the recent concerns over rising mortgage rates. Elsewhere from an Antipodean perspective, today saw the release of the latest GDT data, which showed a decline in milk prices and subsequently weighed on NZD in the latter half of trade.
Thereafter, the main focus from a data perspective in early European hours was that of UK construction PMI, which printed in-line with expectations and subsequently didn’t provide markets with any hawkish surprises heading into ‘Super Thursday’. Furthermore, concerns for GBP were also raised by the latest article by Ed Conway in The Times titled "A plummeting pound (GBP) is just what we need" and concerns over the UK C/A deficit.
The main mover for the session was very much the USD, which exerted broad-cased strength throughout the session with the USD seemingly more favourable this week in comparison to last week’s month end rebalances. As such, EUR/USD broke through 1.1000 to the downside (where there was also said to be USD 1.7bln of option expiries), GBP/USD was sent back below 1.5400 despite a modest recovery in the closing stages of European trade and USD/JPY broke above 121.00. Furthermore for the USD, analysts also attributed strength to key technical levels in US fixed income markets with the US 2yr yield breaking above 0.75% and 10yr above 2.20%. Note that overall, macro news flow remained relatively light today with US data seemingly unable to provide any traction for prices ahead of Friday’s NFP release.
Looking ahead, participants will await after-market comments from SNB’s Jordan and ECB President Draghi, with potential comments from the latter a source of caution for EUR traders.