Forex Market Review – Sterling biggest gainer after BOE report; EURGBP falls to 19-mth low

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Euro was subject to downside pressure going into the European trading session after consolidating in the Asian session. EURUSD opened in Europe at 1.3119 and fell 0.4 per cent to 1.3066. There was an absence of key euro zone economic data today to give the euro a clear direction but markets are focused on tomorrow’s important Spanish 10-year bond auction which will be a real test for the euro. On Monday, yields breached the key 6 percent level and caused the single currency to tumble. Yields have since eased. There was some nervousness in the markets today when French President Nicholas Sarkozy said that a strong euro hurt exporters and should be discussed with the European Central Bank.

 

Sterling outperformed today after the Bank of England policy meeting minutes of the April meeting were released, and were less dovish than expected. All but one member voted for no further quantitative easing (QE). Monetary Policy committee members noted the persistent elevated inflation levels, which fuelled speculation for the unlikelihood of further QE. Meanwhile, UK unemployment showed a drop to 8.3 percent in February versus a previous 8.4. GBPUSD surged to a two-month high after the BOE and jobs report, peaking at 1.5998. EURGBP fell to a 19-month low of 0.8176, the lowest since 29 August 2011.

 

Yen weakened across the board on speculation of more monetary easing by the Bank of Japan in order to deal with high inflation. The focus turns to the April 27, BOJ meeting. USDJPY extended its advance from the Asian session and opened in Europe at 81.32 to climb to 81.55. The pair gained 1.5 percent since the seven-week low of 80.28 touched on Monday. After a strong two-day rally to 106.88, EURJPY eased to 106.27 on profit-taking but remains above the Ichimoku cloud.

 

A broadly stronger US dollar today lifted USDCHF to 0.9200 from 0.9157. EURCHF opened in Europe at  1.2015 and began rising ahead of the naming of Swiss National Bank chief. After the official announcement of Thomas Jordan as permanent Chairman, EURCHF jumped to 1.2032.       During a press conference currently underway, the new Chairman reiterated that the SNB is committed to enforcing the cap of 1.20 per euro on the Swiss franc.