Coming Up Today (all times GMT)
- GBP Asset Purchases Facility (11:00)
- GBP Official Bank Rate (11:00)
- GBP MPC Rate Statement (Tentative)
- EUR Minimum Bid Rate (11:45)
- EUR ECB Press Conference (12:30)
- CAD Building Permits m/m (12:30)
- USD Unemployment Claims (12:30)
- USD Natural Gas Storage (14:30)
Global equities were generally on the rise on Wednesday, as a better ADP Jobs number increased optimism about the official US Non-Farm Payrolls number to be reported on Friday. The recent downward trend of the dollar against its main rivals appears to have been halted, as many investors are cautiously covering some of their shorts ahead of the Big Jobs report on Friday. Commodity currencies like the Canadian and Aussie dollar remained at elevated levels against the greenback, as commodities have been enjoying a rally on optimism about the global recovery.
Again, it is expected to be a busy day ahead with several economic releases coming up on Thursday. However, markets will be mainly focusing on the BOE and ECB interest rate decisions. Analysts are generally predicting a wait and see approach by European Central Bankers today, and it is considered highly unlikely that there will be any change in the official interest rates. However, it is well known that any fundamentally significant comments made by policy makers, either with respect to the growth or inflation outlook, will tend to have an important impact on future interest rates. A more hawkish stance will tend to put more strength into the European currencies, whereas the opposite could happen if a more cautious and pro-dovish outlook is demonstrated.
The pair has recently peaked at around 1.3260 to trade as low as 1.3130, mainly due to dollar strength. Perhaps market participants are keeping a cautious stance with respect to going over the fence in shorting the dollar, especially ahead of interest rate meetings and the Payrolls report. Technically, the pair's upward momentum is still intact, and it would require a break below 1.30 for the bulls to become worried.
The cable has too given back some of its recent gains, to find some support around 1.5850 and climb a bit higher. The latest data on the UK economy have been generally encouraging, with the exception perhaps of the Services PMI number, which came out on Wednesday to be lower than expected. Today, the BOE is expected to leave both its benchmark interest rate, as well as its Asset Purchases Facility unchanged. Officials will rather wait for the official inflation report to be announced later on in the month before taking any firm stance on that. Depending on how cautious or optimistic their assessment is on the recent improvement of the UK economy, will give some indication to markets about future interest rate direction. As such, a more conservative stance will tend to put a halt on the cable's upward move, whereas the opposite is also true.