Mike Paterson’s daily Forex brief
The Pound has enjoyed a day in the sun as first BOE Deputy Governor Paul Tucker warned that inflation may stay above 3% until year-end contrary to previous forecasts, the MPC minutes showed a 9-0 and 8-1 vote to keep rates and QE on hold and then UK jobs came in better than expected as I reported when signing off yesterday.
GBPUSD immediately rallied but ran into sellers around 1.5980 only to find further legs to get through 1.6000 and has since been up to 1.6078 before capping, for the moment at least.
EURGBP needed no excuse to fall rapidly given Eurozone concerns and dipped through 0.8200 with little effort before stalling. We’ve since been down to 0.8166 (GBPEUR up to 1.2250), levels which we haven’t seen since August 2010. 0.8140 remains key support as I have mentioned before and this is proving one step too far at present.
Elsewhere the Pound’s rally is also clearly evident with GBPCHF touching 1.4725 and GBPAUD back up above 1.5500, and we’ll see over the next few days whether this strength can be maintained. I still say sell into these GBP rallies.
Inflation concern in a low-growth economy is not a cause for celebration and the jobs data is hardly mind-blowing given there will be more public sector cut-backs still to come. But hey, every dog has its day in these fickle times and traders love the feeding frenzy as I’ve oft said. Let the trend be your friend. For a while at least. Just don’t get greedy.
Big focus this morning comes with the Spanish 10 Year bond auction at 09.30 and there’s talk of large EUR option expiring today, which may well have an impact if prices get close enough.
EURUSD has found a bid for the time being but running into sell orders again above 1.3150 as I type.
Congrats to Chelsea who have set up a chance of European glory with a 1-0 win last night at home to Barcelona (as if you didn’t already know!), and the fact that the visitors left their shooting boots at home doesn’t diminish the measure of the Blues’ success.
And finally, our thoughts are with Aussie rugby legend Michael Lynagh who has been admitted to hospital after suffering a stroke. Let’s hope for a full and speedy recovery.
09.30– EU- Spanish 10 year bond auction
13.30-US- Weekly Jobless Claims
15.00- US- Existing Home Sales / CB Leading Index / Philadelphia Fed Manufacturing Index
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