EUR Granted Reprieve As JPY Strengthens

EUR is granted a period of reprieve, as markets now await Eurogroup and EU leaders meeting over the weekend, while risk-off sentiment bolsters JPY due to a sharp fall in Chinese equities.

Today has seen sentiment reverse for EUR, with EUR/USD bucking its recent trend to trade higher and retake the 1.1000 handle to the upside. This comes after yesterday saw the Eurogroup agree to meet on Saturday and EU leaders on Sunday, in an attempt to agree to a short term deal and avoid a Grexit. While a deal still seems distant, with a proposal not having officially been given to creditors, the more conciliatory rhetoric between Greece and their creditors has been enough for EUR/USD to pare some of its losses, after the pair fell by around 200 pips on the week at yesterday’s low.

Elsewhere, after the Asia session saw sharp losses in Chinese equities, JPY has seen a safe haven bid, weakening USD/JPY to see the pair at 6 week lows and approaching the 121.00 handle to the downside amid risk off sentiment.

The combined JPY and EUR strength has seen the greenback lower by around 0.3% throughout the day ahead of Fed minutes tonight, where participants will be closely watching for any clues as to preference from the Fed for a September rate hike or conversely, if there’s a preference to hold off until the winter.

Finally, GBP has trended lower since the open, with some desks pointing to today’s UK Budget, with the Conservatives tightening fiscal policy, which could need to be countered by loose monetary policy.

Looking ahead past today’s FOMC minutes release, tomorrow sees Australian employment change, Chinese PPI and CPI, BoE rate decision and US weekly jobs numbers as well as comments expected from Fed’s Kocherlakota, Brainard, George, Japanese PM Abe, ECB’s Weidmann and Noyer.

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