Overnight AUD came under selling pressure sending AUD/NZD to a fresh record low, after S&P said the Australian budget, due in May 2015, would be vulnerable to risk overseas which could risk the country's AAA rating. However, some of the downside was subsequently pared after S&P came out and said their view on Australia's AAA rating remains the same.
In early European trade, USD was initially broadly weaker against its major counterparts in the wake of the dovish FOMC minutes release. GBP also saw a bout of underperformance in early trade following some dovish comments by BoE-Hawk McCafferty who said the level of current GBP appreciation is slightly uncomfortable and is an issue that should be monitored, adding it is better to hold interest rates at current levels for a little bit longer. The broadly weaker GBP saw EUR/GBP test 0.7400 to the upside thus providing a further boost to EUR/USD.
Thereafter, EUR/CHF saw a bout of strength which was attributed to potential SNB intervention in lieu of the comments from SNB’s Jordan a few days ago. This subsequently supported USD/CHF and saw the USD-index return to relatively unchanged territory. Elsewhere, commodity currencies felt the squeeze from the decline in energy prices with WTI and Brent Markedly lower throughout the session in the wake of yesterday’s API inventory report showed a 6th consecutive build in stockpiles (+14300k vs. Prev. +1600k), while the above official exp. DoE report actually saw energy prices come off their worst levels as was not as large a build as yesterday’s API report.
Today’s session also saw further developments regarding the ongoing Greek/Eurogroup negotiations. More specifically, Greece confirmed they had made an official request for an extension to their loan agreement by six months, although denied they had seeked an extension to their current bailout programme. However, EUR/USD face a bout of selling pressure after Germany said they rejected the latest Greek proposal as it does not meet existing requirements. This subsequently saw EUR/USD fall over 30 pips in a fast-money move as participants remain increasingly cynical over ongoing negotiations. This was then followed up by a NY think tank which suggested Greece and Eurogroup may still strike a short term deal tomorrow although contingency plans for a dirty exit are being made, however, EUR/USD remained relatively insulated to these comments.
From a data perspective, USD remained unphased by the latest weekly jobs data, with the initial jobless and continuing claims data painting a mixed picture of the US labour market, with the miss on Exp. for Philly Fed also failing to weigh on USD. Looking ahead, tomorrow sees the release of a slew of eurozone PMI readings, UK retail sales and US manufacturing PMI. However, all eyes will continue to be focused on any breakthrough or breakdown in Greek/Eurogroup negotiations.