Thursday October 21, 2010 - 14:05:43 GMT
Share This Story
Forex Hound - www.forexhound.com
U.K. Budget Cuts May Force BoE to Stimulate Economy
The GBP USD is under pressure overnight following a strong
rise on Wednesday. The reversal of the previous dayâ€™s rally is a sign that the
action was most likely short-covering rather than new buying. Traders were
reacting to the Bank of England minutes which showed a three-way split as to
whether the central bank should provide additional stimulus to the economy.
With the government starting another round of spending cuts,
many traders feel the BoE will be forced to provide fresh quantitative easing
to prevent a double-dip recession. Speculators pressured the Sterling overnight in anticipation of a
further easing of monetary policy. Additionally, an overnight report showed U.K. retail
sales unexpectedly dropped in September for a second month, encouraging traders
to further explore the short side.
While this report pushes the central bank closer to printing
more money to help the economy, traders firmly believe that the next U.K.
inflation report will be the final determinant as to when the BoE will begin
another round of quantitative easing and how much aid will be made available.
Technically, Wednesdayâ€™s rally stopped at 50% of the sharp
break at 1.5878. This price level was based on the short-term range of 1.6106
to 1.5650. Since the main trend turned down on the daily chart earlier in the
week, yesterdayâ€™s rally may have set up a secondary lower top.
If this is the case, then the next move is likely to
continue down to 1.5701. An acceleration through this level could trigger an
even further break to an uptrending Gann angle at 1.5616 or the .618
retracement level at 1.5605.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."