FX Overseas: USD Weakness

EUR/USD
The pair settled the session sharply higher, after the release of weaker than expected US macro-data, as well as somewhat mixed data from China, spurred on broad based USD weakness as market participants were again forced to liquidate long USD/JPY positions. In terms of EU related macroeconomic commentary, the session also saw the release of better than expected Manufacturing PMIs, which also supported the pair. Elsewhere, ECB's Draghi said OMT is designed to keep yields below panic levels, not to levels that would help government solvency. Draghi added before the ECB takes on bank supervision, will conduct balance sheet review with appropriate involvement of private sector companies, and stated the Single Supervisory Mechanism for banks will take effect in June.
GBP/USD
The pair traded in tandem with EUR/USD, underpinned by the release of better than expected macroeconomic data, as well as a weaker USD, which fell sharply after a bout stops was tripped on the break of 100.00 in USD/JPY. In terms of EU related commentary, Shadow Monetary Policy Committee (SMPC) decided by five votes to four that Bank Rate should be raised on Thursday 6th June (David Smith Economics). One reason why a narrow majority of the SMPC wanted to raise Bank Rate in June was the belief that lending costs would have to be normalised at some point. It was less disruptive to make the necessary rate hikes early and in ‘baby steps’ than to leave it too late and then have to make an abrupt upwards move.
USD/JPY
The pair settled below the key 100.00 level, after market participants were forced to scale back their long USD/JPY bets following the release of less than impressive macroeconomic data from China and the US. As such, it looks increasingly likely that markets may reassess the timeline for the Fed to scale back its QE program which will lead to more USD weakness in the short-term.