As expected the USD remained two-sided and lighter on volumes overnight as traders awaited the results of the ECB general council meeting.
Initially firm the USD came under selling pressure from Eastern European names as the Yen crosses continued to attract interest into European trade. Scoring another lifetime high, EURO/JPY took the spotlight and GBP/JPY followed suit as well. GBP and EURO both rallied overnight into important resistance areas but USD/JPY remained under the 119.50 area and traders are increasingly nervous about the prospects for a USD/JPY advance. High prints in GBP were at 1.9793, under yesterday’s highs, but still firm into New York trade on the back of better UK balance of trade numbers. Initially seen as weaker, the balance of trade data gave GBP a modest dip which was bought by the same Eastern Europeans that were buying EURO and selling USD/JPY traders say.
EURO has met resistance at the 1.3480 area as expected and pulled back a bit but traders note the rate remains buoyant. Just released was ECB rate data showing the bank has left rates on hold; attention now turns to the press conference for clues as to the timing of the next rate increase. In my view, the ECB will be the next major central bank to hike rates and the market is fully expecting a 25 bp hike no later than June. Should the ECB signal a hike in May—