EURUSD

The USD could gain momentum on breaking 1.31 making on the Fed`s tone which has given a signal especially to the Asian to buy the US Treasury note by saying that the current interest rate is still accommodative. Recently the market has down graded the 92 bln inflows to the US market as this was because of the hedge funds not and the Japanese percentage of buying these treasuries bond has been reduced for the fourth month. We have seen an appreciation of the growing energy prices in the assessment in spite of repeating that the inflation is still well contained over the long run and leaving of the word of measured pace of tightening refer to a further coming .25% hike in the next meeting. So saying that the current stance is still accommodative with this 7th 25% continuous hike has shown a brighter interest outlook than what was discounting that there can be a pause of hiking sooner than later.


GBPUSD

The currency market is still expecting another rate hike in the coming quarter but the rate out look is in favor of the USD currently after today`s hawkish tone of the Fed`s US assessment of inflation in the same time Feb UK CPI was 1.6% y/y well below the market expectation of 1.7% and the BOE target of 2% and this is the third consecutive month we see the same rate.


USDJPY

We have said on 9 March that

In spite of the high oil prices the pair and the Japanese official talk of no change of the USD domination or its asset, the JPY gains was fueled by a real decline of the USD reserve which mean that there is an actual direction of reducing its USD exposure and a slow down of the Japanese intervention tend to weakening the JPY supporting the greenback. We see that further USD decline and increasing of oil prices can really make a change of the Japanese policy and light the Asian carry of the greenback.

And on the 10th of this month Kuizomi has come out and said that Japan is considering its reserve diversification.

With the beginning of this week, we have seen a market preferring of buying the pair on the inflation differential between the 2 counties and its impact on the yield outlook which has given attractiveness to the greenback as the market eye has turned to the interest rate outlook.
We see this FOMAC assessment impact on the currency market sentiment can be prolonged on hopes of further Asian buying of the USD and its treasury bonds on this stronger rate outlook which can underpin the US inflows of the next months compensating its widening trade deficit.

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