London Session

EUR/USD has pushed higher late in the London morning, taking out the 1.4200 level. While price action has picked up in the approach to the US open, earlier in the day consolidation and profit-taking had been a more dominant theme in many cross rates and assets classes. European stocks traded lower through most of the morning, cable had continued to shy away from the GBP/USD1.6400 level and the EUR, AUD and NZD had spent most of the morning lower vs the USD. The approach of key central bank meetings and the US payrolls data later in the week had injected a cautious tone into the market.

The rise in the Eurozone unemployment rate to 9.2% in April from 8.9% in March has focused attention on the ongoing economic difficulties facing the region. Overnight, the RBA surprised the market by stating that scope remains for some further easing of monetary policy. Risk is that the ECB could also maintain a dovish tone this week particularly given last week's soft inflation data and this had kept EUR buyers sidelined through most of the London morning.

The EUR's gains vs the USD have now dragged cable through the USD1.6400, a level which had offered resistance through most of the session. Good news for the UK came this morning in the form of a rise in mortgage approvals to 43K in April from 39K in March and a moderate rise in lending on dwellings to GBP1.0 bln. These data signal a tentative improvement in housing demand suggesting the massive softening in monetary policy is beginning to impact. However, it is likely that the BoE will retain its dovish stance at this week's MPC meeting and this may inject a cautious tone into the pound later this week.

USD/JPY has been the biggest mover of the session so far with the USD falling back towards the middle of its range vs the JPY after yesterday's rise. This afternoon, US pending home sales and ABC consumer confidence data will be watched.