British Pound Unlikely to Find Clear Bearing in BOE Minutes, Jobs Data

Talking Points

• Bank of England Minutes Unlikely to Signal Change in Policy Framework
• British Pound May See Muted Reaction to Increase in UK Jobless Claims
• Yen Sold as Asian Stocks Rise After IMF Upgrades 2012 Growth Outlook

Minutes from April’s Bank of England policy meeting headline the economic calendar in European hours. Traders will look to the voting pattern on the rate-setting MPC committee to gauge the possibility of additional stimulus in the near term. Two votes in favor of further easing from known doves David Miles and Adam Posen represent the status quo, with anything more perceived as a shift in favor of further accommodation that is likely to weigh on the British Pound. Alternatively, an 8-1 or 9-0 outcome will probably prove supportive.

On balance, we suspect another 7-2 outcome coupled with neutral rhetoric is the path of least resistance, with most BOE officials waiting for February’s increase in asset purchases to be fully absorbed and an updated quarterly inflation report to be produced in May. Jobless Claims figures are also on tap, with expectations calling for a 6,000 increase in applications for benefits in March. A print in line with expectations doesn’t present a material change in overall labor market trends and so may not produce a meaningful response from price action.

The Japanese Yen slumped overnight – sliding as much as 0.7 percent against its leading counterparts – as a rally across Asian stock exchanges sapped safe-haven demand. The MSCI Asia Pacific regional benchmark equity index added 1.2 percent after the IMF upgraded its outlook for world economic growth in 2012. The fund now believes global output will add 3.5 percent this year, up from a January estimate of 3.3 percent. Importantly, this still marks a slowdown from the 3.9 percent increase recorded in 2011. The key features of the macroeconomic landscape – a pickup in the US against a backdrop of recession in the Eurozone and a slowdown in China – likewise remained in place.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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