Coming up Today (All Times GMT)
- GBP - Manufacturing Production (09:30)
- GBP - MPC Interest Rate Decision (12:00)
- EUR - ECB Interest Rate Decision (12:45)
- CAD - Trade Balance (13:30)
- USD - Production Price Index, Trade Balance & Jobless Claims (13:30)
- NATURAL GAS - Weekly Inventories (15:30)
Wednesday, the success of the Portuguese bond auction triggered a 150 pip rebound of the euro against the US dollar. The European currency rallied from $1.2990 to $1.3140, as investors returned to be buyers of European bonds and stocks. So far, it seems that Portugal has managed to find some respite on the debt market, but the calm could be short-lived. The reason is that sovereign risks are far from being solved, as several euro-zone members are competing to refinance their debt to avoid being caught in a spiral of rising interest rate. Today, Spain and Italy will try to capitalize on the positive sentiment to issue respectively €2 billion and€ 4 billion of Treasury notes. In the current context, investors should remain cautious, as the market seems to hesitate between extreme pessimism and over-optimism.
EURUSD Support/Resistance: 1.3050/1.3150
The euro rally contributed to lift the pound sterling, which crossed the $1.5700 resistance level for the first time of the year. The rise of the pound was supported by the EU-UK close economic ties, as well as speculations that the Bank of England might raise its benchmark rate sooner rather than later. Today, the Monetary Policy Committee is expected to hold UK interest rate unchanged. However, the question is how long will the Bank of England be able to stand the criticism that it is not focused on fighting rising inflation. Looking forward, the heat of this debate could help the pound extend its bullish move, with $1.5820 as near-term target.
GBPUSD Support/Resistance: 1.5675/1.5820
EURGBP Support/Resistance: 0.8300/0.8340