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- Nov, 20 British Pound Fails to Find Support at 20-Day SMA, Euro Maintains Narrow Range
- Nov, 19 Euro Loses Ground Despite OECD Forecast, British Pound Weakens for Third Day
- Nov, 18 British Pound Holds Narrow Range Following BoE Minutes, U.S. Dollar Loses Ground on Risk Appetite
- Nov, 17 British Pound Fails to Hold Ground Despite the Rise in U.K. CPI, Euro Consolidate
- Nov, 16 Euro Poised to Test Yearly High, British Pound Continues to Trend Sideways
- Nov, 13 Euro Halts Three-Day Decline as Economy Emerges From Recession, British Pound Rally Supported by 20-Day SMA
- Nov, 12 Euro Forms Top Following Three-Day Decline, British Pound Finds Support Ahead of 20-Day SMA
- Nov, 11 British Pound Stumbles on BoE Comments, Euro Continues to Push Towards Yearly High
- Nov, 10 British Pound Halts Five-Day Rally as Fitch Sees Risk for UK’s Credit Rating
- Nov, 09 Euro Poised to Test Yearly High, British Pound Breaks Out of Range to Hit 3-Month High
- Nov, 06 Dollar Finding Support Ahead Of Non-Farm Payrolls, Will Rising Unemployment Reverse Sentiment?
- Nov, 04 Euro, British Pound Advances Ahead of the Federal Open Market Committee Interest Rate Decision
- Nov, 03 Euro, British Pound Falter – U.S. Dollar Regains Footing Ahead of FOMC Interest Rate Decision
- Nov, 02 Euro Holds Range, British Pound Weakens on Speculation for Further Easing
- Oct, 30 British Pound Halts Four Day Rally, Euro Continues to Eye 20-Day SMA
- Oct, 28 Euro, British Pound Stumble as Investors Curb Appetite for Risk
- Oct, 29 Euro, British Pound Advance Ahead of U.S. 3Q GDP
- Oct, 27 British Pound Remains Supported by 50-Day Moving Average, Euro Continues to Hold Range
- Oct, 26 Euro Hits Fresh Yearly High, British Pound Weighed by Speculation for Further Easing
- Oct, 23 British Pound Tumbles Lower as 3Q GDP Disappoints, Euro Hits Fresh Yearly High
The British pound surged to a high of 1.6614 against the greenback following the Bank of England interest rate decision as the central bank increased its asset purchase program to GBP 200B from GBP 175B in the previous month amid forecasts for an expansion to GBP 225B, and the currency may continue to appreciate over the coming months as policy makers hold a hawkish outlook for inflation.
Talking Points
• Japanese Yen: Rallies Across the Board on Risk Aversion
• Pound: BoE Expands Policy - Industrial Outputs, Manufacturing Tops Forecasts
• Euro: ECB President Trichet to Hold News Conference at 13:30 GMT
• US Dollar: Unit Labor Costs, Nonfarm Productivity on Tap
British Pound Advances as BoE Expands Asset Purchases to GBP 200B Versus GBP 225B Expected
The British pound surged to a high of 1.6614 against the greenback following the Bank of England interest rate decision as the central bank increased its asset purchase program to GBP 200B from GBP 175B in the previous month amid forecasts for an expansion to GBP 225B, and the currency may continue to appreciate over the coming months as policy makers hold a hawkish outlook for inflation. At the same time, the BoE kept borrowing costs at the record-low and held a hawkish outlook for inflation, stating that higher oil prices paired with the value-added-tax (VAT) could lead price pressures to rise “sharply” over the near-term.
Moreover, the BoE held an improved outlook for the future growth and said that the rebound in economic activity will soon become evident, and went onto say that bank funding conditions have picked up following the unprecedented steps taken by the government. In addition, the MPC noted that the weakness in the British pound could fan inflation over the coming months, and continued to see a risk for a protracted recovery as “substantial margin” of spare capacity remains throughout the economy. Meanwhile, the economic docket showed industrial outputs in the U.K. increased 1.6% in September amid expectations for a 1.2% rise, while the annual rate of production slipped 10.3% from the previous year after falling 11.5% in the previous month. Moreover, manufacturing jumped 1.7% during the same period to top forecasts for a 1.0% expansion, while the annualized rate slipped 9.3% after falling 11.6% in August, and the data reinforces an improved outlook for future growth as policy makers see the economy emerging from the worst recession since the post-war period.
The euro failed to hold above the 20-Day SMA (1.4862) and tipped lower during the overnight session to reach a low of 1.4810, and the single-currency is likely to face increased volatility going into the U.S. trade as the European Central Bank is scheduled to set policy at 12:45 GMT. At the same time, ECB President Jean-Claude Trichet will speak at the ECB news conference at 13:30 GMT, and comments from the central bank head is likely to move the currency market as investors weigh the outlook for future policy. Meanwhile, retail spending in the Euro-Zone unexpectedly slipped 0.7% in September to mark the 16th consecutive monthly decline, with the annualized rate tumbling 3.6% from the previous year amid expectations for a 2.4% drop, and households may continue to curb their rate of consumption over the coming months as they face a weakening labor market paired with tightening credit conditions.
The U.S. dollar strengthened throughout the overnight trade as investors scaled back their appetite for risk, but failed to maintain the rally against the Japanese yen, with the exchange rate slipping back below the 20-Day SMA (90.68) to reach an intraday low of 89.98. Nevertheless, as equity futures foreshadow a lower open of the U.S. market, the greenback may push higher throughout the day as the reserve currency continues to benefit from safe-haven flows. Meanwhile, nonfarm productivity is expected to increase 6.5% in the third quarter after rising 6.6% during the three-months through June, while unit labor costs are forecasted to fall 4.2% during the same period after tumbling 5.9% in the second-quarter, and businesses may continue to ramp up their rate of production throughout the remainder of the year as policy makers see the economy returning to growth over the coming months. At the same time, initial jobless claims are anticipated to fall to 522K in the week ending October 31 from 530K in the week prior, with continuing claims projected to drop to 5750K from 5797K in the week ending October 10, and the data is likely to encourage an improved outlook for the labor market ahead of the Non-Farm Payrolls report due out on Friday.
Will The EUR/USD Maintain Its Rally? Join us in the Forurm
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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