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FOREX: British Pound Gains on Hawkish BOE Hopes, Aussie Dollar Slips

FOREX: British Pound Gains on Hawkish BOE Hopes, Aussie Dollar Slips

2011-02-07 08:51:00
Ilya Spivak, Sr. Currency Strategist
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Key Overnight Developments

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3542

1.3677

GBPUSD

1.6055

1.6249

The Euro retraced higher in overnight trade, adding as much as 0.4 percent against the US Dollar as the currency digested Friday’s losses. The British Pound outperformed, adding 0.5 percent against the greenback (see below). We maintain a bearish bias for EURUSD and GBPUSD.

Asia Session Highlights

CCY

GMT

EVENT

ACT

EXP

PREV

AUD

22:30

AiG Performance of Construction Index (JAN)

40.2

-

43.8

JPY

23:50

Official Reserve Assets (JAN)

$1093B

-

$1096.2B

AUD

0:30

ANZ Job Advertisements (MoM) (JAN)

2.4%

-

1.2% (R-)

AUD

0:30

Retail Sales s.a. (MoM) (DEC)

0.2%

0.5%

0.4% (R+)

AUD

0:30

Retail Sales Ex Inflation (QoQ) (4Q)

-0.3%

0.1%

0.7%

JPY

3:30

BoJ Governor Shirakawa Speaks on the Economy

-

-

-

JPY

5:00

Coincident Index (DEC P)

103.1

103.1

102.4

JPY

5:00

Leading Index (DEC P)

101.4

101.4

100.6

AUD

5:30

Foreign Reserves (A$) (JAN)

40.8B

-

41.6B

The Australian Dollar spiked briefly lower after December’s Retail Sales report fell short of expectations, with inflation-adjusted receipts down 0.3 percent in the fourth quarter to mark the first decline since the three months through September 2009. The currency dropped as much as 0.3 percent against its top counterparts but quickly recovered to trade within familiar ranges for the remainder of the session.

The British Pound outperformed its major counterparts in Asian trade, rising as much as 0.34 percent on average as traders added to bets that the Bank of England will strike a hawkish posture at this week’s monetary policy announcement. A Credit Suisse gauge of priced-in rate hike expectations for the year ahead advanced 10 basis points to the highest in a year. As we discussed in our weekly forecast, the likelihood of a hawkish turn at the BOE seems plausible, but its ability to boost the currency may prove fleeting in the event that risk aversion makes a comeback as traders’ sentiment sours upon digesting the details of the last Friday’s US jobs report.

Related Article:British Pound: Risk Trends May Undermine Gains from Hawkish BOE

Euro Session: What to Expect

CCY

GMT

EVENT

EXP

PREV

IMPACT

EUR

9:30

Euro-Zone Sentix Investor Confidence (FEB)

14

10.6

Low

EUR

11:00

German Factory Orders n.s.a. (YoY) (DEC)

21.3%

20.6%

Medium

EUR

11:00

German Factory Orders s.a. (MoM) (DEC)

-1.5%

5.2%

Medium

German Factory Orders headline a quiet economic calendar, with expectations calling for a 1.5 percent decline in December to mark the first drawdown in three months. The outcome may not prove meaningfully market-moving however considering the moderation in manufacturing activity has had ample time to be priced in following the more timely Purchasing Managers Index figures tracking the sector’s performance released last week.

Later in the session, traders will turn their attention to a small batch of US earnings reports as well as December’s US Consumer Credit figures. Four S&P 500 names including retailer Loews Corp and toymaker Hasbro Inc set to release results. Currency markets will size up the outcomes in terms of their implications for the health of the world’s top consumer market and its ability to take up as the leading driver of the global recovery, with positive outcomes likely to be supportive for risk appetite.

For real time news and analysis, please visit http://www.dailyfx.com/real_time_news

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

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