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FOREX: Euro and British Pound Sold Ahead of ECB, BOE Rate Decisions

By , Currency Strategist
07 July 2011 06:35 GMT

Talking Points

  • Euro, British Pound Fall Ahead of ECB and BOE Rate Decisions
  • Australian Dollar Outperforms on Stellar Employment Report

Needless to say, interest rate decisions from the European Central Bank and the Bank of England are in the spotlight today. The ECB is widely expected to deliver another 25bps interest rate hike, but the outcome may not prove altogether supportive for the single currency. Indeed, the likelihood of further tightening this time around has been well priced in for the past two weeks according to data compiled by Credit Suisse, so the move won’t catch traders by surprise and may not produce much volatility.

This puts the onus on the press conference with ECB President Jean-Claude Trichet following the initial policy announcement, with the Euro trading lower in anticipation of a softer tone going forward as the debt crisis continues to linger on the Euro Zone periphery.

Meanwhile, the British Pound is also on the defensive on expectations of another non-event, with BOE Governor Mervyn King and company likely to offer another “no change” verdict as priced-in inflation expectations continue to slide, giving the bank room to argue that elevated headline CPI readings owe to temporary factors.

The Australian Dollar outperformed overnight, rising as much as 0.5 percent on average against its leading counterparts after June’s Employment report proved dramatically better than economists expected. The economy added a net 23,400 jobs – the most in three months – with full-time employment soaring by 59,000 to register the largest increase since July 2008.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Performance of Service Index (JUN)

35.8

-

39.6

23:50

JPY

Machine Orders (MoM) (MAY)

3.0%

3.0%

-3.3%

23:50

JPY

Machine Orders (YoY) (MAY)

10.5%

10.9%

-0.2%

23:50

JPY

Official Reserve Assets (JUN)

$1137.8B

-

$1139.5B

1:30

AUD

Employment Change (JUN)

23.4K

15.0K

-0.5K (R-)

1:30

AUD

Unemployment Rate (JUN)

4.9%

4.9%

4.9%

1:30

AUD

Part Time Employment Change (JUN)

-35.6K

-

28.8K (R-)

1:30

AUD

Full Time Employment Change (JUN)

59.0K

-

-29.3K (R-)

1:30

AUD

Participation Rate (JUN)

65.6%

65.6%

65.5% (R-)

2:00

JPY

Tokyo Average Office Vacancies (JUN)

8.81

-

8.88

6:30

AUD

Foreign Reserves (A$) (JUN)

41.1B

-

40.3B

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Trade Balance (euros) (MAY)

-5700M

-7144M

Low

7:15

CHF

Consumer Price Index (MoM) (JUN)

-0.2%

0.0%

Medium

7:15

CHF

Consumer Price Index (YoY) (JUN)

0.7%

0.4%

Medium

7:15

CHF

CPI - EU Harmonised (MoM) (JUN)

-

-0.1%

Medium

7:15

CHF

CPI - EU Harmonised (YoY) (JUN)

-

0.3%

Medium

8:30

GBP

Industrial Production (MoM) (MAY)

1.1%

-1.7%

Low

8:30

GBP

Industrial Production (YoY) (MAY)

-0.5%

-1.2%

Medium

8:30

GBP

Manufacturing Production (MoM) (MAY)

1.0%

-1.5%

Low

8:30

GBP

Manufacturing Production (YoY) (MAY)

2.1%

1.3%

Medium

10:00

EUR

German Industrial Production (MoM) (MAY)

0.8%

-0.6%

Medium

10:00

EUR

German Industrial Production (YoY) (MAY)

7.0%

9.6%

Medium

11:00

GBP

Bank of England Asset Purchase Target

200B

200B

High

11:00

GBP

Bank of England Rate Decision

0.5%

0.5%

High

11:45

EUR

European Central Bank Rate Decision

1.50%

1.25%

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4176

1.4429

GBPUSD

1.5938

1.6081

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07 July 2011 06:35 GMT