BoE left rates unchanged at 0.50% as widely expected and expanded the asset purchase program by GBP 25b to GBP 200b. The expansion was below consensus expectation of GBP 50b. boE said in the accompanying statement that the prospect is for a slow recovery in the level of economic activity, so that a substantial margin of under-utilized resources persists, and that will bear down on inflation for some time to come. Sterling was lifted mildly again st dollar and yen after the decision. Also the pound was supported by better than expectation data from UK today which saw industrial and manufacturing productions rose by 1.6% mom and 1.7% mom in September.

Euro managed to climb against dollar and reversed earlier loss against yen after ECB announced to keep rates unchanged at 1.00% and hinted on gradual withdrawal from the emergency stimulus measures. ECB President Trichet said in the news conference that the governing council will make sure that the extraordinary liquidity measures taken are phased out in a timely and gradual fashion and that the liquidity provided is absorbed in order to counter effectively any threat to price stability over the medium to longer term. Nevertheless, data from Eurozone was disappointing and saw retail sales dropped -0.7% mom, -3.6% yoy in September.

Other data released today saw US Q3 non-farm productivity rose much more than expected by 9.5% but with unit labor costs dropped sharply by -5.2%. Initial jobless claims improved mildly to 512k. Canadian building permits rose 1.6% mom in September. Swiss CPI rose less than expected by 0.6% mom in October. New Zealand unemployment rate rose more than expected to 6.5% in Q3. Australian trade deficit widened less than expected to -1.85b.

Dollar index dips further to as low as 75.51 in early US session after BoE and ECB announcement, but there is no strong follow through selling yet. Intraday bias remains on the downside as long as 75.98 minor resistance holds and decline from 76.82 might still extend further. However, we'd still expect downside to be contained above 74.94 support to conclude the fall. Above 75.98 will flip intraday bias back to the upside for retesting 76.82 resistance first.


GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6438; (P) 1.6517; (R1) 1.6635; More

GBP/USD's rise from 1.6261 resumes after brief consolidation and break of 1.6603 resistance suggests that consolidations from 1.6692 has possibly completed at 1.6261 already. Intraday bias will now remain on the upside as long as 1.6465 minor support holds and further rise should be seen to take on 1.6692/6740 resistance zone. On the downside, below 1.6465 will indicate that an intraday top is formed and turn outlook mixed.

In the bigger picture, outlook remains rather mixed. 1.6740 resistance looks vulnerable in case of resumption of rise from 1.5706. Break there will confirm that fall from 1.7043 has completed with three waves down to 1.5706 already. The three wave structure will indicate that it's merely a correction to medium term rebound from 1.3503 only. In other words, another high above 1.7043 should be seen before GBP/USD tops out. Nevertheless, before that, the bearish case is still mildly in favor. Below 1.6261 support will revive the case that GBP/USD has topped out at 1.7043 already and turn focus back to 1.5706 support for confirmation.