Forex Market Review – GBPUSD hits new 7-month high

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Euro rallied sharply in early European trading hours, lifted by a soft dollar as a result of a dovish Fed policy statement yesterday. EURUSD rose to a fresh three-week high of 1.3261 gaining 40 pips. But the pair soon fell and lost all gains, dropping to 1.3199, following  a report that showed economic confidence in the euro zone fell in April. Also, German CPI data was lower in April than the previous month.

 

EURJPY fell to 106.47 from 107.60 as euro fell across the board and yen was in demand as a safe haven.

EURGBP fell to 0.8155 from an early high of 0.8184, weighed by a stronger pound.

 

GBPUSD rose to a new seven-month high of 1.6205, lifted by a weaker dollar and sterling was in demand as an alternative investment to euro or dollar. Speculation is still strong  that the Bank of England will stay away from further quantitative easing at its next policy meeting. This is in contrast to the Federal Reserve, which signalled yesterday that it left the door open for more stimulus measures.

 

USDJPY extended its fall going in to the European session at 81.15  and dropping to 80.65. Demand for the safe haven yen rose due to risk aversion following weak European data and worse than expected US jobless claims data. This further weighed on the dollar. Initial claims for last week rose to 388,000, more than the predicted 375,000. Focus turns to the Bank of Japan policy meeting tomorrow. There is expectation for further easing. This usually weakens the yen. But markets may have already priced this in.