The pound continues to hold its own against the US dollar, and was trading in the mid-1.55 range. Wednesday’s British data was a mixed bag, as the Halifax House Price Index jumped 1.1%, its best showing in four months. This easily beat the estimate of 0.2%. The news was not as good from the BRC Retail Sales Monitor, which dropped 2.2%. This was the indicator’s sharpest decline since May 2012. The markets will be hoping for better news from official Retail Sales numbers later in the month. In the US, Crude Oil Inventories disappointed, coming in way below the estimate. The yield on US 10-year bonds will be released later today.
After the ECB took action and reduced interest rates, the markets had a chance to hear ECB head Mario Draghi, who spoke in Rome on Monday. Draghi said that last week’s cut was taken due to the continuing slowdown in the Eurozone, and urged Eurozone countries to take the necessary steps to get their fiscal houses in order. Draghi repeated that the ECB was open to further rate cuts, as well as lowering its deposit rates below zero. When he mentioned the latter point last week, the euro took a dive, but this time, the markets did not react. However, not all policymakers favor further reductions. Yves Mersch, an ECB board member, stated that interest rate cuts have limits to their effectiveness.
New Italian Prime Minister Enrico Letta is on a European tour, and has called for an end to strict austerity. Letta wants to see the Eurozone leaders concentrate on renewing growth, rather than simply implementing more austerity measures. He received an enthusiastic welcome in Paris from French President Francois Hollande, whose popularity has plummeted due to his government’s austerity measures. Letta’s remarks were not received as warmly when he visited Berlin, as Germany is tired of bailing out other zone members and is a strong proponent of fiscal consolidation – namely, more austerity. We can expect some lively exchanges at future Eurozone summits regarding how to breathe life into the Eurozone’s ailing economy.
Remember all the talk about Greece being on the ropes and possibly leaving the Eurozone? Well, according to the IMF, things have improved. The organization released a report this week which praised Greece for its efforts to reduce crippling deficits, commending the country for ”exceptional progress” in the past four years. The IMF also noted approvingly that Greece had increased competitiveness and kept the financial sector stable. At the same time, the report found that the country has failed to tackle tax evasion or cut the inefficient public sector, and these factors had contributed to a deep recession. With an economy that has shrunk by 20% and an unemployment rate at a staggering 27%, Greece is by no means out of the woods, and may still need a helping hand from the IMF or ECB in the near future.
GBP/USD for Wednesday, May 8, 2013
GBP/USD May 8 at 14:30 GMT
GBP/USD 1.5538 H: 1.5547 L: 1.5471
GBP/USD has gained ground in Wednesday trading. The pair is facing strong resistance at 1.5630. This is followed by a resistance line at 1.5695, which is protecting the 1.57 line. On the downside, the pair is putting pressure on 1.5524. This is followed by a support level at 1.5432. This line has strengthened as the pair trades higher.
- Current range: 1.5524 to 1.5630
Further levels in both directions:
- Below: 1.5524, 1.5432, 1.5309, 1.5203 and 1.5111
- Above: 1.5630, 1.5695, 1.5773 and 1.5844
OANDA’s Open Positions Ratio
GBP/USD ratio is unchanged on Wednesday. This is not reflected in the current movement of the pair, as the pound has posted modest gains against the dollar. If GBP/USD continues to be active, we are likely to see movement from the ratio as well.
With no major releases out of the UK or US today, GBP/USD is quiet, and we can expect the drifting to continue today. Thursday should be busier, with as the US releases Unemployment Claims and the BOE announces the new interest rate and QE levels.
- 7:00 British Halifax HPI. Estimate 0.2%. Actual 1.1%.
- 12:30 US FOMC Member Jeremy Stein Speaks.
- 14:30 US Crude Oil Inventories. Estimate 2.1M. Actual 0.2M.
- 17:00 US 10-year Bond Auction.
- 18:00 US Treasury Secretary Jack Lew Speaks.
*Key releases are highlighted in bold
*All release times are GMT
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