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Euro Cross Pick 09.05.2012

Euro Cross Pick 09.05.2012

David Song, Strategist

As the Bank of England and the European Central Bank interest rate decisions come into focus, we may see the EURGBP threaten the range-bound price action carried over from the previous month as market participants weigh the prospects for future policy. The BoE may turn out to be a non-event as the central bank maintains a wait-and-see approach, but the ECB may trigger a sharp selloff in the exchange rate should the policy meeting disappoint. Indeed, there’s high expectation of seeing a major development amid talks that the Governing Council will introduce a sterilized, unlimited bond purchasing program to tackle the debt crisis, but it seems as though the central bank will stay away from capping yields as they look to target short-term maturities. However, if we don’t see any additional details on the non-standard measure, we may see the pair threaten interim support around the 0.7880, and a break and a close below the key figure will reinforce our bearish outlook for the euro-pound as we anticipate to see fresh yearly lows in the exchange rate.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.