EUR/USD
The pair settled last week in positive territory, supported by the release of inflation data out of Germany, as well as the surge higher by the EUR/JPY, which itself was driven by broad-based JPY weakness, which was evident throughout the week. So much so that the JPY cross erased good sized barriers above 139.00 level and advanced to its highest level since October-2008. Reports mid-week that the ECB is looking at introducing an LTRO in order to help promote bank lending has failed to weigh on the EUR, since such a move will be less damaging for the currency when directly compared to the impact that an introduction of negative deposit rates will have on the general sentiment towards the currency. This week the ECB is widely expected to leave the benchmark borrowing rate unchanged but leave the door open for further easing in the form of another, somewhat modified LTRO or even negative deposit rates.
GBP/USD
Similarly to the EUR/USD, the pair finished last week with solid gains, supported by a weaker USD and also broad based JPY weakness, which saw the GBP/JPY rise to its highest level since October 2008. The pair also benefited from the decision by the BoE to terminate FLS mortgage incentives in 2014. The move higher by the pair came in spite of the fact that BoE's Carney said that FLS changes won’t impact monetary policy, which also resulted in short-sterling strip coming under selling pressure as market participants focused on comments that UK house-price inflation is gaining momentum. Looking ahead for the pair, one of the key releases out of the UK will be the BoE rate decision on Thursday, however, there are no expectations for a change in the central bank’s policy.
USD/JPY
Broad-based JPY weakness was evident throughout last week, which in turn saw the EUR/JPY and GBP/JPY advance to its highest levels since October 2008, while the major pair itself advanced to its highest level since mid-May. In addition to that, the pair not only erased barriers at 101.00, but also at 102.00 levels, while the EUR/JPY erased barriers at 138.00 and 139.00 levels. Much of the attention this week will be on central banks in Europe and also the UK, while Friday will see the latest jobs report release by the BLS.