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The Pound has started to consolidate near the 50-Day SMA at 1.4287 after yesterday's rally against the dollar. Sterling reached as high as 1.4337 on the Fed's announcement that it was purchasing long-term assets.

Talking Points
• Japanese Yen: BoJ Leaves Rate Unchanged Increase Debt Purchases
• Pound: Public Sector Borrowing Improves
• Euro: German Chancellor Say Country Done with Stimulus
• US Dollar: Initial Jobless Claims On Tap

Pound, Euro Continue To Find Support Post Fed Quantitative Easing Announcement

The Pound has started to consolidate near the 50-Day SMA at 1.4287 after yesterday's rally against the dollar. Sterling reached as high as 1.4337 on the Fed's announcement that it was purchasing long-term assets. Although, we saw profit taking during Asian trading which sent the pound/dollar to an intraday low of 1.4158, it has found support on a higher public borrowing report. Britons increased their use of credit by 9.0 billion which was a complete reversal of January's -2.68 billion. This could be a sign that consumer confidence is returning and we may see an increase in consumption which could help spur domestic growth.

The jump in lending is a sign that markets are improving and the BoE' ongoing quantitative easing policy should continue to help loosen credit markets. Indeed, the central bank today said that it was reviewing its current dollar repo program as market conditions are improving. The efforts o the government should help bring an end to the worst housing crisis since the Great Depression which has been an albatross for the economy. If we see the pound/dollar break above the 50-day SMA then a test of 1.4500 is likely with the 100-Day SMA at 1.4705 as the next target.

The Euro continues to find support as it is back above the 1.3500 price level despite falling to an intraday low of 1.3415. The single currency was unfazed by German Chancellor Angela Merkel stating the Germany has done enough stimuli after passing through two packages worth 81 billion euros. The euro/dollar pair appears to have more upside potential with the 38.2% Fibo of the 1.6036-1.2328 decline as the next possible resistance level.

The dollar was slaughtered yesterday after the Fed's announcement that it would buy $300 billion in ling-term debt to help spur lending in an effort to stimulate the economy. The greenback lost over 400 bps against the Euro, Pound and Yen on the news, which could set it up for a retrace today. We have started to see dollar strength overnight, but given that the central bank intends to start printing money we may see continued weakness for some time. Additionally, the action send equity markets higher and the increase in risk appetite will also be a weighing factor on the dollar. The fundamental calendar could dampen optimism as initial jobless claims are expected to be above 600,000 which are expected to push continuing claims to 5.323 million. Indeed, U.S. stock futures are pointing toward a lower open which could lend greenback support. An expected improvement in activity on the Philadelphia area could be overshadowed by the leading indicator reading which is forecasted to decline by 0.6%. Regardless, the actions by the government should continue to impact price action over the near-term, which could spell continued dollar weakness.

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To discuss this report contact John Rivera Currency Analyst:
jrivera@fxcm.com