Mike Paterson’s daily Forex brief

Eurozone fears remain and GBP trims its recent gains ahead of UK data and interest rate/QE decisions.

Fears over the Eurozone still prevail and the expected raft of rhetoric has done little to give traders or investors any comfort, but attention now switches to the UK this morning.

09.30 brings us Industrial and Manufacturing Production and then at 12.00 comes this month’s decision on interest rates and QE from the Old Lady.

While it is a certainty that rates will remain on hold there will definitely be some debate on whether to increase QE. The second round of easing has been completed and the Bank has to decide whether to extend it again to £350 billion or leave the programme unchanged. Most economists reckon it will be prudent for them to keep things on hold after inflation surprisingly rose in March to 3.5 %, but I’m not so sure given that we are now back officially in recession and there are widespread calls for measures to stimulate growth.

The real debate is just how far this pumping of money into the economy has any real impact and just how much of a difference it can be deemed to make.

Either way traders have been expressing some concerns and trimming back on a few long positions ahead of the announcement. GBPUSD yesterday dipped below 1.6100 but found good support at the key 1.6085 level and EURGBP has bounced back to 0.8050 (GBPEUR down to 1.2422) after failing to break below strong barrier-option support at 0.8000 (1.2500). GBPCHF had a look above 1.5000 but it too has fallen back while GBPAUD has seen the biggest fall from 1.6083 overnight to a low of 1.5883 after better than expected Australian employment data.

Meanwhile the Euro has remained under pressure overall but we’re seeing good two-way business at these lower levels.

EURUSD ran into those sellers around 1.3000 that I mentioned yesterday and fell through strong support at 1.2950 before finding a few buyers queuing up around 1.2915. Sellers are lined up around 1.2970 now.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

Stop Press: UK Industrial Production as expected – 0.3% in March but Manufacturing up 0.9% v 0.5% forecast. GBP little changed after an initial dip.

Now awaiting BOE at midday.

Congrats to Blackpool who edged out Birmingham to reach the Championship play-offs at Wembley where they take on West Ham but hey! Hold the front page, the Olympic torch is this morning being lit by a high-priestess, “who captures the morning sun's rays in a parabolic mirror”. That should keep the Greeks off the streets for a while…not.

Today’s Data:

09.00 – E & ECB Monthly Report

09.30-UK – Industrial Production / Manufacturing Production

12.00-UK – BOE Interest Rate Decision

13.30-US – Trade Balance

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email mike.paterson@economicvoice.com
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.

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