Forex Daily Wrap: Riksbank Anouncement Sends EUR/SEK Lower

Today provided a flurry of central bank releases with the Riksbank kicking off proceedings after they unexpectedly kept interest rate on hold at -0.250% despite a majority of analysts expecting a 10bps cut to -0.350%, which sent EUR/SEK lower by more than 700 pips. Furthermore, the Riksbank expanded their quantitative easing programme further by SEK 40-50bln and warned of a possibility of a further cut in rates in the near future.

The USD-index trended lower with market participants position squaring ahead of today's FOMC meeting with US GDP Annualized (Q1 A) Q/Q 0.2% vs. Exp. 1.0% adding to the long list of weak data from the US in Q1. Despite the weaker data, UST’s remains in negative territory with 10y yields breaching above 2% for the first time since March 17th and RANsquawk sources noted carry-trade driven hedge fund buying in USD/JPY offering marginal support to the pair however paring all of its earlier gains heading into the European market close. For EUR/JPY, main desks are eyeing a break of 131.50 which could result in the cross to test 135.00. GBP/USD has benefitted from broad based USD weakness and reached 8 week highs as investors are caught short shrugging off some of the political uncertainty surrounding the UK. EUR/USD also posted fresh 8 week highs bolstered by the softer USD as well as positive rhetoric from EU’s Moscovici stating that negotiations are close however, maintaining that progress remains slow.

Commodity-linked currencies are the main benefactors of the weaker USD as basic materials and crude oil reside firmly in the green with AUD/USD sitting comfortably above 0.800 printed highs not seen since January 21st.

Looking ahead sees the release of Japanese Industrial Production, Russian rate decision, German Unemployment change, ECB economic bulletin, US ISM Milwaukee, Chicago PMI, EIA NatGas storage change and BoJ rate decision as well as possible comments from BoC Poloz, BoJ Kuroda, Fed’s Tarullo (Voter, Dove).