The pound rallied aggressively against major counterparts as speculation grew the Bank of England may suspend the quantitative easing program of which a total of GBP175b will be pumped into the economy. This comes as late last week the BOE indicated a continuance of the stimulus with the remaining GBP50b to be distributed in the next month. The market reaction was immediate, with those caught short sterling being forced out of positions, aiding the rally of two big figures against the greenback to current levels of US$1.6265.
Euro Zone Consumer Price Index was unchanged for the month of September compared with the 0.3% decline in August, against economists' expectations of a 0.1% rise. In annual terms the latest figures were 0.3% weaker than September last year, representing the fourth consecutive monthly decline. The news was initially greeted with a broad based sell-off on the Euro but regained composure as the US Dollar saw some mild resistance on the back of better than expected economic data.
To the US and we saw initial jobless claims for the week ending October 10 come in under consensus to a level of 514,000 compared to the previous weeks upward revision to 524,000. The data also showed the number of people that claim unemployment benefits on an ongoing basis also dropped to 5,992,000 from the previous upward revision to 6,067,000 for the week ending October 3.
US Consumer Price Index also showed a rise of 0.2 percent for September up from the August figure of 0.1%. The consensus was for a rise of 0.1 percent.
Overall movements on the greenback overnight were largely mixed with the greenback working on more of a reactive basis.
The Aussie dollar has maintained in perch above US$.9200 overnight with the comments of Reserve Bank Governor Glenn Stevens still resonating through the market. Interest rate speculation is once again in full form as yesterdays comments by Mr. Stevens painted a very clear picture of the RBA's stance on monetary policy stating The period of greatest weakness in the Australian economy is probably past. Barring another serious international setback, the economy is likely to continue on a path of gradual expansion during 2010. For currency traders this simply spelled rate hike. The market responded immediately with the Aussie surging in the ensuing minutes of the release.