The tight range trade seen in Asia was broken in Europe with the market once again committing to the short USD side. Heading into the US open, all major currencies are higher against the buck, with the exception of Sterling which trades flat.
The tight range trade seen in Asia was broken in Europe with the market once again committing to the short USD side. Heading into the US open, all major currencies are higher against the buck, with the exception of Sterling which trades flat. The release of the BOE Minutes has been impacting price action in the Pound, following the surprise 3-way split decision after 7 members voted for a 25B extension, while Miles voted for an extra 40B of QE, and Dale unexpectedly voted for no extension to QE at all. Some downbeat comments from the Minutes also resonated with investors after revealing that downside risks to activity in the near-term were greater than the central projections from the November interest rate decision. Finally, the fact that the BOE conceded that a lower discount rate could prove to be a useful tool, also helped to act as a strain on the UK currency.
Relative Performance Versus USD on Wednesday (As of 11:20GMT) –
There was little else to talk about overnight with much of the currency gains driven off of similar themes and drivers that have dictated price action over the past several weeks. The negative USD sentiment still reigns and until investors are proven otherwise, any dips in currencies continue to be used as formidable buy opportunities. However, it is worth mentioning that the critical 50-Day SMA which has supported much of the up-trend in Eur/Usd in 2009, is just below at 1.4790, and if closed below, could garner some significant momentum for the USD.
On the data front, Eurozone current account and construction output were weaker than previous readings, but these releases failed to materially factor into price action. Meanwhile in the UK, CBI industrial trends came in slightly better than expected, but also failed to have any real impact on price action. Elsewhere, on the final day of President Obama’s trip to China, a prominent economist and adviser to the PBOC, has said that he sees the risk of a double dip recession in the US, that is not likely in China.
Looking ahead, it is a busy North American calendar with Canada CPI (0.1% expected) kicking things off at 12:00GMT. US CPI (0.2% expected) then follows at 13:30GMT, along with housing starts (600k expected) and building permits (580k expected). On the official circuit, Treasury Secretary Geithner hosts a small business financing forum at 14:00GMT, while Fed Bullard speaks on the economy in Missouri at 14:15GMT. US equities point to a marginally higher open, while on the commodity front, gold continues to surge to record highs now just shy of psychological barriers at $1150. Meanwhile oil is also bid.
