Yesterday both the European Central Bank (ECB) along with the Bank of England (BOE) held their key interest rates steady as market reaction to announcements were muted with key players awaiting jobs data from the U.S.
The Cable was unchanged on the day while the EUR/GBP was higher 0.8295, from an opening day price of 0.8277. The EUR/JPY also ended the day unchanged.
In his comments following the interest rate decision, ECB President Jean-Claude Trichet described a rosier picture for the European economy. Economic growth was better than expected during the second quarter but he also warned markets of slowing growth in the second half of the year.
The BOE signaled its intention to hold both its interest rate along with its bond purchases at the current levels. An increase in purchases would constitute further monetary policy easing by the BOE Monetary Policy Committee. As expected, interest rates were held at a record low of 0.5% following signs of an improving British economy. Last week Q2 GDP was reported unexpectedly higher by 1.1% and has fueled a rally of the pound versus the dollar.
British manufacturing and inflation data are due to be released this morning. Traders will be following these two releases, in particular the inflation numbers. Positive outputs could send the GBP/USD higher above the resistance line at 1.5970 which coincides with the 61.8% Fibonacci retracement level from the high last year in August.