Forex markets were very calm on Monday following the U.S. GDP release that shocked the financial world on Friday and sent the Dollar tumbling against its major peers. The generally negative global economic releases weighed on risk assets on the first session of the week, despite the relatively good results from the European Bank Stress Tests. The Pound fell compared to most of its peers before this week’s rate decision by the BOE, as the Euro held on to its gains from Friday against the Dollar.

Oil continued lower again, and it got close to the $40 level for the first time since April, as the crucial commodity now gave back half of the four-month rally that took it from $28 to $52. Commodity currencies suffered again after a bullish session on Friday, as both the Australian Dollar and the Canadian Dollar lost ground against the majors, finishing as the weakest G10 currencies of the day.  The New Zealand Dollar also drifted lower, although its still remains relatively strong compared to its closest counterparts.

GBP/JPY (current price: 134.90)

The most volatile major currency pair lost more than 700 pips since hitting 142 two weeks ago, as it continues to trade in a sharply declining trend channel, despite the strong rally off the previous lows near 128. The Yen and the Pound both experienced wild swings, but the cross got back to the lower boundary of the dominant trend channel after the choppy period. All eyes are now on the 130 level that might be in danger this week, following the Bank of England’s rate decision.

Our assessment: GBP/JPY has been drifting lower in the past two weeks and it now trading right at the mid-point of its short-term range near 135, before the al important BOE meeting that could lead to a significant move this week.

EUR/JPY (current price: 114.25)

The pair is held up relatively well despite the negative news on the European economy yesterday, as the weakness in the U.S. economy lifted the common currency against most of its peers. The Yen passed to advance on Monday but the trend might remain bullish for the currency, and bearish for the pair, as the Bank of Japan is now not expected to increase its Quantitative Easing program in the near future. The pair might get volatile again, later on this week, after Monday’s calm session.

Our assessment: EUR/JPY fell back below 115 yesterday after trading as high as 118.75 one week ago, but the lows below 110 still seem distant before the BOE decision.

Gold (current price: $1360.00) and Silver (current price: $20.61)

Precious metals consolidated after a bullish week on a low-volatility day that ended near the intraday highs for both gold and silver. The metals are now close to their previous highs, with gold being only 1.5% off the 1375 level, while silver is standing a bit more than 3% off its bull market high near 21.20. The week might be crucial for the safe haven assets, as the BOE meeting and the U.S. Employment Report both have the potential to cause major moves.

Our assessment: Silver has recovered most of the losses that it suffered during the correction in early July, and the metal might be ready to re-test the highs, as central banks remain dovish globally.

Economic Releases

The Australian Dollar will be in focus today following the RBA interest rate decision in early trading. Investors expect a 0.25% rate cut that would be the second cut in after the surprise move in May. TheSpanish Employment Report and Swiss Retail Sales will kick off the European session, with the British Construction PMI coming out later on during the morning.  The U.S. Core PCE Price Index and Personal Spending will be published during Wall Street hours while the evening session will be highlighted by the GDT Dairy Index.