Sterling jumps earlier today as BoE minutes unveiled that one more member favored tightening in last meeting. Spencer Dale, after Andrew Sentance and Martin Weale, voted for increasing interest rates amid heightened inflationary pressures. Among the remaining 6 voting members, 5 voted to keep the Bank rate at 0.5% and the asset-purchase program at 200B pound while one favored extending the size of the program.
Policymakers acknowledged that global inflation has picked up recently. According to the central bank, much of the rise in global inflation 'had reflected a rise in commodity prices'. While the rally in agriculture prices due to temporary supply shortage was the most significant, the situations in energy and metals have been getting more and more serious. The BOE forecast that some commodity prices could 'rise further if the global economy continued to grow robustly'. More in BOE's Minutes Unveils One More Member Favors Tightening.
Euro also managed to extend recent rise against dollar on rate speculations. ECB Trichet, Quaden and Weber are due to speak later today, after the Europe close, and will be a focus. Regarding other matters, Trichet said earlier today that he is really confident that the European Parliament will push for improved fiscal and economic governance in the eurozone. Also, he emphasized that in a single currency area that is not a fully fledged political federation, countries need to improve governance and fiscal and competitive policies.
Elsewhere, risk aversion is still a major theme in global financial markets on Libyan and middle east unrest. Global equities are generally lower. Gold remains firm around 1400 level while crude oil edged to new two year high. While swissy remains firm, dollar and yen somewhat weakens mildly today as pressured against Euro and Sterling. Nevertheless, Aussie, Canadian dollar and New Zealand dollar are all soft even though crude oil and gold are both strong.
On the data front, Japan trade surplus narrowed to JPY 0.19T in January while corporate service price dropped -1.1% yoy. Australian wage cost index rose 1.0% qoq in Q4. Swiss combined PPI rose 0.1% mom in January, flat yoy. UK BBA loans for house purchase rose slightly to 28.9k in January. Eurozone industrial new orders rose 2.1% mom, 18.5% yoy in December.
Dollar index's fall from 78.87 resumed after brief recovery and intraday bias is back on the downside for 76.88 support. As noted before, the three wave corrective structure of the rebound from 76.88 to 78.87 indicates that whole decline form 81.31 is still in progress. Break of 76.88 will confirm decline resumption and should target 61.8% projection of 81.31 to 76.88 from 78.87 at 76.13 next. We'll stay bearish as long as 78.32 minor resistance holds.
GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.6080; (P) 1.6154; (R1) 1.6207; More.
GBPUSD rises to 1.6271 so far today but is limited by 1.6276 near term resistance. Intraday bias remains neutral and consolidations from 1.6276 could still continue with another fall. Below 1.6100 minor support will flip bias back to the downside for 1.5962 support. Nevertheless, we'll stay bullish in GBP/USD as long as 1.5750 support holds and expect another rally eventually. On the upside, decisive break of 1.6276 will confirm that whole rise from 1.5343 has resumed. In such case, GBP/USD should target 61.8% projection of 1.4230 to 1.6298 from 1.5343 at 1.6621 next.
In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4230 is treated as the third leg of such consolidation and with 1.5343 support intact, such rise could still continue for 1.7043 resistance. But after all, strong resistance should be seen between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside. On the downside, break of 1.4230 support will be the first signal of down trend resumption and will turn focus to 1.3503 low for confirmation.
Economic Indicators Update
|23:50||JPY||Corporate Service Price Y/Y Jan||-1.10%||-1.30%||-1.30%|
|23:50||JPY||Trade Balance Total (JPY) Jan||0.19T||0.70T||0.71T||0.58T|
|0:30||AUD||Wage Cost Index Q/Q Q4||1.00%||0.90%||1.10%|
|8:15||CHF||Producer & Import Prices M/M Jan||0.10%||0.10%||0.30%|
|8:15||CHF||Producer & Import Prices Y/Y Jan||0.00%||0.00%||0.30%|
|9:30||GBP||BBA Loans for House Purchase Jan||28.9K||29.0K||28.7K|
|10:00||EUR||Eurozone Industrial New Orders M/M Dec||2.10%||-1.00%||2.10%||2.20%|
|10:00||EUR||Eurozone Industrial New Orders Y/Y Dec||18.50%||16.20%||19.90%||20.00%|
|15:00||USD||Existing Home Sales Jan Jan||5.20M||5.28M|
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