Bank of England policy makers decided against further QE last month and acknowledged that official data may show that the UK economy entered recession in the first quarter. The MPC voted 8-1 to leave QE unchanged, with Adam Posen, previously the arch-dove of the committee making a surprise switch.
Claimant count data also surprised markets yesterday, the number of people claiming benefit rose by only 3.6k from a forecasted 6.6k. These surprise events triggered significant sterling strength across most major pairs.
Sterling peaked at 1.2232 against euro, the highest rate since August 30th 2010. The pair closed at 1.2217, well above the key 1.2150 level, a much anticipated event which could lead on to further gains. The topside target now appears to be 1.2285 with 1.2235 proving to be a mid range resistance.
GBPUSD responded similarly and touched a high of 1.6042 from a low of 1.5895 for the day, trading upwards overnight to around 1.6065 this morning. The recent break back above 1.60 now opens the door for fresh upside towards the October peak of 1.6150. However, additional gains beyond 1.6150 should prove hard to come by, once again there are risks for a reversal back down towards key support at 1.5800.
GBPAUD also gained significantly and achieved the 2-week high of 1.5473.
GBPJPY traded at a session high of 130.445 back above 130, a significant position prior to possible further intervention from the Japanese Central Bank.
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EURUSD began trading at 1.3104 and traded downwards to 1.3057 until 2.30pm, coinciding with the release of EIR Crude oil stocks which were twice the expected figure. EURUSD closed the session yesterday at 1.3120 and opening markets this morning with little change seen overnight.
This morning’s Spanish bond auctions will be of particular interest. The bill auction on Tuesday saw solid demand but the previous bond auction was disappointing. If the Spanish auction disappoints again, the euro could move to 1.30 EURUSD and 1.2285 GBPEUR.
The Eurozone’s current account swung from a surplus to a deficit of €1.3bn in February from a downwardly revised surplus of €3.7bn in January. European Construction output MoM for February fell dramatically to -7.1% from January’s -0.5%.
Finance leaders gather in Washington this week to discuss boosting resources for the International Monetary Fund, the German central bank is prepared to provide up to €41.5bn to the fund and will press leading non-European economies this week to match Europe’s firewall against its debt crisis.
The IMF raised its outlook for global economic growth to 3.5% for the year, but warned that while prospects have improved in recent months, Europe’s debt crisis and a potential oil price spike still threaten to destroy a fragile recovery.
MBA Mortgage Applications in the US improved from the previous -2.4% with 6.9%.
The Bank of Canada said the economy will be stronger this year than it earlier forecast as companies become more confident in US growth and as risks from Europe’s debt crisis diminish. The world’s 10th largest economy will expand 2.4% in 2012, up from a January projection of 2%, the central bank said today.
National Australia Bank’s Business Confidence was released this morning at -1, falling for the first 3 months of 2012.
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