Mike Paterson’s daily Forex brief
A lively 24 hours with the ECB holding fire on interest rates, but then the Euro falling after Draghi gave a bleak outlook at the press conference suggesting that monetary easing could not be ruled out. Later in the day however came news of a bailout plan to be announced to help the ailing Spanish banks and the oversold Euro came bouncing back with a vengeance.
EURUSD had fallen to the strong 1.2440 support lines again on Draghi’s comments including the admission that some ECB members wanted interest rate cuts this time, but by the NY close we’d seen a rally back to 1.2585, forcing EURGBP back up from a dip to 0.8059 (GBPEUR up to 1.2408) to a high thus far of 0.8132 (1.2295).
Adding fuel to this rally and a generally better risk sentiment was further talk from US Federal Reserve members about monetary easing and traders squaring positions ahead of today’s eagerly awaited testimony from Fed Chairman Bernanke at 15.00 BST where many forecasters predict he will announce further easing measures.
First up though is the BOE interest rate decision at 12.00 BST and whether the MPC feels the time is now right for more QE as has been the clamour of late. Services PMI data just released shows a better than expected 53.3 versus 52.5 forecast and the Pound is staging a small rally as a result.
Good two-way business at these levels across the board and this pattern should continue for the morning session. EURUSD has a large option expiry at 1.2525 this afternoon which might be targeted but equally defended, but there’s also plenty of sellers on rallies towards 1.2600 and 1.2625.
The Aussie $ has found support again from better than expected jobs data and the rise in Gold and we’ve seen AUDUSD test strong resistance around 0.9980 with GBPAUD falling yet again currently just off its overnight lows at 1.5533.
UK Prime Minister Cameron today meets with German Chancellor Merkel no doubt with a couple of messages to pass on from his new best buddy Barack, providing a useful ally at this critical stage of talks having alienated himself previously.
All in all then another busy day ahead but whether anything is actually done anywhere remains to be seen. But these are nervous times and traders will play hot-potato with their positions for sure.
We shouldn’t see much of that as England secure a comfortable 3-0 series win with the Third Test starting today, while footie fans await the start of Euro2012 tomorrow and Andy Murray heads back to wherever he lives these days after his French Open exit.
Let’s be careful out there.
Interbank Rates 08:48 BST
Today’s Data: BST
09.30-UK- Services PMI
12.00-UK BOE Interest Rate decision
13.30-US- Weekly Jobless Claims
15.00-US- Federal Reserve Chairman Bernanke testifies
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