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Forex Research - Pound Unchanged As BoE Leaves Rate Unchanged Will Trichet Follow Suit?
â€˘ Japanese Yen: Finds Resistance Near 110, Consolidates at 109.50
â€˘ Euro: ECB Decision Ahead
â€˘ British Pound: BoE Leaves Rates Unchanged At 5.00%
â€˘ US Dollar: MBA Applications on tap
Pound Unchanged As BoE Leaves Rate Unchanged Will Trichet Follow Suit?
The Pound was virtually unchanged following the announcement that the
BoE left their benchmark unchanged at 5.00% as they continue to weigh
the downside risks to the economy against inflation rising to 3.8%. A
housing slump that is approaching the worst levels in a quarter century
has brought the British economy to the doorstep of a recession. The
manufacturing and service industries shrunk in July and consumer
consumption fell 3.9% in June.
After falling as low as 104 during trading yesterday, the Euro found a
bid tone ahead of the ECB rate announcement, but failing to climb back
above 1.500. The markets will be listening attentively to President
Trichetâ€™s post announcement press conference today for any indication
on the ECBâ€™s future bias. The central bank leader stated following last
monthâ€™s 25 bps rate hike, that interest rates at a seven year high of
4.25% â€świll contribute to achieving our objective of price stability. I
have no biasâ€ť. Those comments and subsequent one from other members
have diffused earlier estimates that further tightening was
forthcoming. The increase in credit costs has accelerated the decline
in growth in the region, which lead to a dovish Trichet. However,
Lufthansaâ€™s pilotâ€™s union earning a wage increase will amplify the
MPCâ€™s concerns over secondary effects of inflation, and continue the
ECBâ€™s staunch hawkish bias.
The USDJPY ran out of steam before hitting significant resistance at
110, and has consolidates at the 109.50 price level. The pair rose over
a 100 points after the Japanese government acknowledged that e country
was heading into a recession. Todayâ€™s 9.9% decline in Machine orders
underlined those statements, as declining demand from emerging markets
and the headwinds from the U.S> continue to take its toll on the
Island countryâ€™s economy.
Initial jobless claims and pending home sales will provide a
significant amount of event risk in their own right. A third straight
week above 400,000 new unemployment applicants will highlight the
weakening labor market. Additionally, another decline is pending home
sales following Mayâ€™s 4.9% decline, which was the biggest since August
2007,, will confirm that the housing market is yet to reach a bottom.
The weak fundamental data could lead to the dollar erasing the past
weekâ€™s gains if a hawkish ECB sparks bearish sentiment.
Has the EUR/USD Peaked? Join us in EURUSD Forum
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