FOREX: Pound Aiming Higher Against Euro, Yen On BOE Minutes Result

By Ilya Spivak, Currency Strategist

Talking Points
  • Pound to Rise Against Euro, Yen if BOE Minuets Show Dovish Camp Shrank
  • Dollar May Rise Alongside Stocks as US Existing Home Sales Hit 22-Month High
  • Minneapolis Fed’s Kocherlakota Says Stimulus Unwind May Come in 2012-13

Minutes from the March meeting of the Bank ofEngland headline the economic calendar in Europeanhours. The outcome may prove narrowly supportive for the British Pound in that the ultra-dovish voting pattern seen inFebruary is unlikely to be repeated this time around. While itwasn’t surprising to see perennial dove Adam Posen vote for an increase in asset purchases, theaddition of David Miles to calls for more stimulus was significant.This produced a 7-2 tally in favor of the status quo but plantedexpectations of an apparently growing pro-QE insurgency.

In March, Mr Posen may have found himself aloneonce more as UK economic data broadly performed at its best sinceMay 2010 relative to expectations. If the vote count is revealed at7-1 or even the unlikely 7-0, traders are likely to reduce bets onfurther QE over the near term and offer Sterling a boost, withoutsized gains expected against the Euro and Japanese Yen (where monetary policy is likely to be leastsupportive over the coming months). The updated UK Budget is also set to be presented to Parliament. Asmaller deficit is likely to reduce bond issuance expectations andlift Gilt yields, encouraging the Pound higher in the process, andvice versa.

On the sentiment front , S&P 500 stockindex futures are pushing firmly higher, hinting riskappetite is likely to be well-supported heading into the openingbell on Wall Street as traders await US Existing HomeSales figures, where forecasts point to the highestreading in 22 months at 4.61 million. What this means forthe US Dollar is no longer as clear-cut as it has been evenrecently however. Indeed, as we observed last week , supportive economic news has been able to produce gains for the S&P 500 and thegreenback alike , reflecting the recent responsiveness of Fedofficials to the apparently firming recovery.

The greenback corrected lower against its major counterpartsin overnight trade as the benchmark currency digested recent gains.USD added 0.5 percent on average yesterday as fears of a slowdown in China and its impact on global output at large stokedsafe-haven demand. Hawkish comments from Minneapolis FedPresident Narayana Kocherlakota – who served on the rate-setting FOMC in2011 before rotating out this and who thereby is surely familiarwith most inner workings of current policy – likewise helped.Kocherlakota said the Fed may begin to unwind monetary stimulus assoon as this year or in 2013.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Current Account Balance (4Q)

-2.763B

-2.825B

-4.751B (R-)

21:45

NZD

Current Account Deficit-GDP Ratio (4Q)

-4.0%

-4.0%

-4.3%

21:45

NZD

Net Migration s.a. (FEB)

-440

-

-650

23:30

AUD

Westpac Leading Index (MoM) (JAN)

0.6%

-

0.7% (R+)

0:00

AUD

DEWR Internet Skilled Vacancies (MoM) (FEB)

-0.2%

-

-0.1% (R-)

2:00

NZD

Credit Card Spending s.a. (MoM) (FEB)

0.5%

-

0.6%

2:00

NZD

Credit Card Spending (YoY) (FEB)

4.0%

-

3.1%

4:30

JPY

All Industry Activity Index (MoM) (JAN)

-1.0%

-0.7%

1.6% (R+)

7:00

JPY

Convenience Store Sales (YoY) (FEB)

4.8%

-

1.7%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:00

CHF

Money Supply M3 (YoY) (FEB)

-

8.2%

Low

9:30

GBP

Bank of England Minutes

-

-

High

9:30

GBP

Public Finances (PSNCR) (£) (FEB)

-1.0B

-16.8B

Low

9:30

GBP

PSNB ex Interventions (FEB) (FEB)

8.0B

-7.8B

Low

9:30

GBP

Public Sector Net Borrowing (£) (FEB)

5.0B

-10.7B

Low

12:30

GBP

UK Budget Presented to Parliament

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3181

1.3376

GBPUSD

1.5830

1.6003

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/03/21/FOREX_Pound_Aiming_Higher_Against_Euro_Yen_on_BOE_Minutes_Result.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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