The British Pound spiked to a low of 1.6768 following the Bank of England meeting minutes as policy makers voted 7-1-1 to increase its asset purchase program by GBP 25B to GBP 200B, but has bounced back ahead of the U.S. trade to remain little changed from the previous day.
Talking Points
• Japanese Yen: Loses Ground on Risk Appetite
• Pound: BoE Votes 7-1-1, Sees Greater Downside Risks
• Euro: Current Account Slips into Deficit, Construction Outputs Falter
• US Dollar: CPI, Housing Starts on Tap
British Pound Holds Narrow Range Following BoE Minutes, U.S. Dollar Loses Ground on Risk Appetite
The British Pound spiked to a low of 1.6768 following the Bank of England meeting minutes as policy makers voted 7-1-1 to increase its asset purchase program by GBP 25B to GBP 200B, but has bounced back ahead of the U.S. trade to remain little changed from the previous day. As the GBP/USD fails to push back above 1.6900, with the RSI approaching overbought territory, we may see the pound-dollar fall back towards the 20-Day SMA at 1.6569 over the remainder of the week to test for short-term support.
The BoE minutes showed the central bank voted unanimously to keep the benchmark interest rate at 0.50%, while board member Spencer Dale wanted to keep the emergency program unchanged at GBP 175B, with David Miles pushing for a GBP 40B increase to GBP 215B, and the split in the MPC may drag on the currency going forward as investors weigh the outlook for future policy. Moreover, the central bank discussed the possibility of cutting the deposit rate for commercial bank reserves in an effort to “ease monetary conditions further,” and went onto say that “some members thought that that downside risks to activity in the near term were somewhat greater than implied by the inflation report projections.” As the BoE fails to meet on common ground and holds a cautious outlook for the economy, the MPC may take further steps to stem the downside risks for growth and inflation and may expand its emergency programs in the months ahead as Governor Mervyn King maintains an “open mind” for future policy. Meanwhile, a report by the Confederation of British Industry (CBI) showed manufacturing orders increased in November to reach its highest level this year, with the index rising to -45 from -51 in the previous month, while the gauge for export orders jumped to -37 from -46 as the depreciation in the exchange rate helped to boost the competitiveness of U.K. goods.
The euro advanced against the greenback during the European trade and rose to a high of 1.4963, but the lack of momentum to push above the previous day’s high (1.5000) may keep the EUR/USD within a narrow range going into the U.S. trade. As the pair fails to break above 1.5050 in November, we could see the double-top formation in the euro-dollar play out over the remainder of the month and may fall back towards the 100-Day SMA at 1.4494 over the near-term to test for support. Meanwhile, the economic docket showed the current account slipped to -5.4B seasonally adjusted in September from a revised reading of 0.6B in the previous month, while construction outputs slipped 1.1% during the same period after rising 0.1% in August, and the data reinforces a weakened outlook for the euro-region as policy makers see a risk for a protracted recovery.
The U.S. dollar weakened against most of its currency counterparts during the overnight session following the rebound in risk appetite, and the greenback may face increased selling pressures going into the North American trade as equity futures foreshadow a higher open for the U.S. market. Nevertheless, consumer prices in the world’s largest economy are expected to increase 0.2% for the second consecutive month in October, with the annualized rate forecasted to fall 0.3% from the previous year after tumbling 1.3% in the previous month, and the rebound in price growth could encourage long-term expectations for higher interest rates in the U.S. as the Federal Reserve concludes its easing cycle. At the same time, housing starts are expected to rise to an annual pace of 600K in October from 590K in the previous month, while building permits are projected to increase to 580K from 573K, and the data is likely to foster an improved outlook for future growth as the economy emerges from the worst recession since the Great Depression.
Is The EUR/USD Forming a Double-Top? Join us in the Forum
Related Articles:
US Dollar Forecast to Trade in Choppy Range on Unclear Sentiment
To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
FX Upcoming
Talking Points
• Japanese Yen: Loses Ground on Risk Appetite
• Pound: BoE Votes 7-1-1, Sees Greater Downside Risks
• Euro: Current Account Slips into Deficit, Construction Outputs Falter
• US Dollar: CPI, Housing Starts on Tap
British Pound Holds Narrow Range Following BoE Minutes, U.S. Dollar Loses Ground on Risk Appetite
The British Pound spiked to a low of 1.6768 following the Bank of England meeting minutes as policy makers voted 7-1-1 to increase its asset purchase program by GBP 25B to GBP 200B, but has bounced back ahead of the U.S. trade to remain little changed from the previous day. As the GBP/USD fails to push back above 1.6900, with the RSI approaching overbought territory, we may see the pound-dollar fall back towards the 20-Day SMA at 1.6569 over the remainder of the week to test for short-term support.
The BoE minutes showed the central bank voted unanimously to keep the benchmark interest rate at 0.50%, while board member Spencer Dale wanted to keep the emergency program unchanged at GBP 175B, with David Miles pushing for a GBP 40B increase to GBP 215B, and the split in the MPC may drag on the currency going forward as investors weigh the outlook for future policy. Moreover, the central bank discussed the possibility of cutting the deposit rate for commercial bank reserves in an effort to “ease monetary conditions further,” and went onto say that “some members thought that that downside risks to activity in the near term were somewhat greater than implied by the inflation report projections.” As the BoE fails to meet on common ground and holds a cautious outlook for the economy, the MPC may take further steps to stem the downside risks for growth and inflation and may expand its emergency programs in the months ahead as Governor Mervyn King maintains an “open mind” for future policy. Meanwhile, a report by the Confederation of British Industry (CBI) showed manufacturing orders increased in November to reach its highest level this year, with the index rising to -45 from -51 in the previous month, while the gauge for export orders jumped to -37 from -46 as the depreciation in the exchange rate helped to boost the competitiveness of U.K. goods.
The euro advanced against the greenback during the European trade and rose to a high of 1.4963, but the lack of momentum to push above the previous day’s high (1.5000) may keep the EUR/USD within a narrow range going into the U.S. trade. As the pair fails to break above 1.5050 in November, we could see the double-top formation in the euro-dollar play out over the remainder of the month and may fall back towards the 100-Day SMA at 1.4494 over the near-term to test for support. Meanwhile, the economic docket showed the current account slipped to -5.4B seasonally adjusted in September from a revised reading of 0.6B in the previous month, while construction outputs slipped 1.1% during the same period after rising 0.1% in August, and the data reinforces a weakened outlook for the euro-region as policy makers see a risk for a protracted recovery.
The U.S. dollar weakened against most of its currency counterparts during the overnight session following the rebound in risk appetite, and the greenback may face increased selling pressures going into the North American trade as equity futures foreshadow a higher open for the U.S. market. Nevertheless, consumer prices in the world’s largest economy are expected to increase 0.2% for the second consecutive month in October, with the annualized rate forecasted to fall 0.3% from the previous year after tumbling 1.3% in the previous month, and the rebound in price growth could encourage long-term expectations for higher interest rates in the U.S. as the Federal Reserve concludes its easing cycle. At the same time, housing starts are expected to rise to an annual pace of 600K in October from 590K in the previous month, while building permits are projected to increase to 580K from 573K, and the data is likely to foster an improved outlook for future growth as the economy emerges from the worst recession since the Great Depression.
Is The EUR/USD Forming a Double-Top? Join us in the Forum
Related Articles:
US Dollar Forecast to Trade in Choppy Range on Unclear Sentiment
To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
FX Upcoming
