We are still waiting on the USD correction, but JPY still getting pressed, while market still gunning for 1.0500. Monday’s GBP ramp partially reversed.
Once again, the market is left waiting for a USD correction and despite seeing this to some degree against the likes of CAD and AUD, the EUR, JPY and CHF continue to be pressured on both risk on sentiment and more specifically in the single currency, political uncertainty. Against the pound, we saw some redress in yesterday’s 2 cent rally from circa 1.2300 to 1.2500, but this move has retraced some 50% despite some healthy PSNB data earlier this morning.
EUR/GBP was lifted off .8500 levels, but quickly stalled around .8560, with the spot rates dictating trade thereon out. US data released included a better than expected existing home sales figure, but this to be expected with respect to the steeper rate hike path into 2017. Looking at US yield, limited movement suggest the USD moves are largely a case of testing key levels, with price action through the day tightening up to reflect the consolidative tone many are anticipating going into the Fed rate meeting next month.
The FOMC minutes tomorrow night will be of limited influence given the 100% expectation of the 25bp rate move next month, so pre-Thanksgiving position trimming is likely to be the key flow later this week. Into the NY session, we expect traders to test 111.40-45 in USD/JPY, while EUR/USD will push for sub 1.0550, which represents the lows from Dec last year. Cross/JPY stays bid, with EUR/JPY eyeing 118.00, and GBP/JPY back above 138.00. AUD/JPY is through 82.00, and will be driven by Wall Street performance from here on out.