Coming Up Today (all times GMT)
- GBP Claimant Count Change (08:30)
- USD Building Permits (12:30)
- USD PPI m/m (12:30)
- USD Fed Chairman Bernanke Speaks (21:45)
- GBP BOE Gov King Speaks (21:45)
Despite the weak euro-zone economic data and concerns about the financial sector, traders bought into riskier assets on Tuesday, in what was characterized by many as a purely technical play. It appears that the markets have become somewhat immune to hearing every day the same concerns about financial woes and debt problems. They are instead focusing on getting direction from technical indicators. The lack of any commentary by the Fed about raising interest rates any time soon, as well as the expression of optimism about a solid US recovery, have helped to support equity markets and overall risk appetite globally.
The pair appears to be in a nice up trending canal, for the last 5 trading sessions at least. The 50-hour moving average has been providing a solid technical support throughout this period, and there is no reason why traders shouldn't play this technical play by buying into dips. After jumping to as high as 1.2350, the pair appears to be steadying at around 1.2320, at the time of this writing. An ongoing improvement in global stock market outlook should continue to boost risk appetite, while at the same time safe haven currencies like the greenback could come under pressure. On the other hand, traders should remain cautious about any unexpected developments that might lead to a reversal of the recent trend.
The cable lost ground on Tuesday to trade as low as nearly 1.4500, after the inflation number was not as high as feared. However, the late afternoon rally on Wall Street has helped the pound climb higher to a new session high around 1.4830. Technically, trading the pound has been more choppy and volatile as compared to trading the euro against the greenback, although general trend has also been up. The release of the UK Claimant Count Change later this morning, as well as upcoming comments by BOE's King in the evening, could have some fundamental impact on the sterling. Any indication by King about monetary tightening, or any improvement in the numbers for the UK jobs market, should have a boosting effect on the pound.