Daily FX Wrap – Today saw risk off sentiment, with bids in JPY as the currency continued to benefit from safe haven flows amid a particularly data light calendar.
The aftermath of last week’s FOMC decision to keep rates on hold remained in focus, along with dampened sentiment due to stock specific news for Volkswagen (OTC:VLKPY). Chairwoman Yellen highlighted concerns over foreign markets in her press conference and it was perceived as more dovish than expected, however several Fed speakers have since focused rhetoric towards the fact that the Fed remain on track to raise rates by the end of 2015, and thus seen sentiment take a more hawkish slant. This was exacerbated today by news that the world’s largest car manufacturer in terms of sales, Volkswagen, have issued a profit warning amid allegations they deceived regulators about the emissions of some 11 million of their vehicles, with global markets reacting to this news with concern.
The USD benefited from a weaker EUR with EUR/USD ending the European session near intra-day lows after breaking its 100 DMA to the downside which resided at 1.1149. This came in spite of JPY seeing strength and trading around the 120 handle against USD, amid safe haven flows aided by Japanese markets remaining closed, with participants away again for a national holiday. Today’s USD strength coincided with a bout of weakness in both energy and materials. Oil trading lower throughout the session with copper finding resistance to the downside against two week lows. As a result CAD, AUD and NOK underperformed. While elsewhere, GBP also saw notable weakness to underperform against the EUR, JPY and USD.
Looking forward on the calendar, later on this evening we have BoE's Shafik and Fed's Lockhart speaking at 1930 BST and 2330 BST respectively. Tomorrow’s calendar sees the release of French, German and EU Manufacturing, Composite and Services PMI’s and US Manufacturing PMI. While speakers include ECB's Draghi, Jazbec and Weidman, BoE's Broadbent and Fed's Lockhart.