BoE May Change Stance With Improvement In Labor Market

Fundamental Headlines

• Big Decision Looms on Fannie, Freddie – Wall Street Journal
• Banks revive spirits as traders await the Fed-Financial Times
• Abu Dhabi fund files claim against Citi - Financial Times
• Stocks, U.S. Futures, Oil Rally on Speculation Fed to Hold Interest Rates -Bloomberg
• Fed May Say Economy Strengthening as It Repeats Pledge to Keep Rates Low -Bloomberg


EUR/USD –  The Euro-zone PMI reading for November rose to a two year high of 54.2 from 53.7 the month prior as both the manufacturing and service sectors continue to expand. Sustainable activity could lead the ECB to reconsider their current dovish stance on monetary policy. Policy makers still see downside risks and are expected to remain on hold unless inflation begins to rise. November’s CPI figures rising to 0.5% from -0.1% missed estimates of 0.6% and remain far from the central bank’s 2.0% target which will allow them to maintain their measured approach. A  2.4% drop in energy costs combined with housing sliding 1.0% offset broader gains. To discuss this and other ideas visit the EUR/USD forum.

GBP/USD – U.K. jobless claims unexpectedly fell for the first time since February, 2008 by 6,3000. Economists were looking for a rise of 12,500 in the number of unemployed as labor figures often lag growth. The U.K. economy is expected to have expended in the fourth quarter after experiencing its worst postwar recession. The claimant count rate held at 5.0% amid expectations of a rise to 5.1% with the average earnings including bonus rising by 1.5% versus forecasts of 1.2%. Higher wages support the government’s prediction that inflation could rise to 3.0% in early 2010, which will put pressure in the MPC to raise rates. To discuss this and other ideas visit the GBP/USD forum.