USD, EUR, JPY flows: EUR holds its own, JPY to remain under pressure

A fairly quiet overnight session saw little FX movement, and Friday doesn’t contain a lot of likely market moving events. However, the comments from the Fed’s Jefferson and Harker yesterday underline that the recent US data supports a less dovish Fed stance. For the moment, this is impacting EUR yields just as much as USC yields, so there is little if any impact on EUR/USD, but we suspect that the EUR will suffer around the March ECB meeting when the ECB is likely to indicate a more dovish stance and some consideration of a May rate cut. For the moment, however, the combination of mild improvement in European data, strong equities, and rising yields in the US and Europe suggest the EUR will hold its own and the JPY will remain under pressure. Today’s German IFO survey is unlikely to have much impact both because the PMI data has already been released and because it is clear that Germany is currently not representative of the Eurozone.