Mid-Day Report: Sterling Boosted by Besley's Vote for Hike

Market Overview | Written by ActionForex.com | Jul 23 08 11:12 GMT |

Sterling was boosted by the BoE minutes released today which surprisingly showed a three way split in voting to keep rates unchanged at 5.00% earlier this month. Markets expected a 8-1 vote but the results showed a 1-7-1 split, with Besley voted for a hike and Blanchflower voted for a cut, with seven other members voted for no change. Besley called for the hike to anchor inflation as well as ensuring BoE's credibility. Sterling strengthens across the board. In particular, the dive in EUR/GBP dragged Euro against the greenback too. Technically speaking, note that EUR/GBP has taking out a near term trend line support which is an indication that sideway consolidation started in early May has completed. In other words, EUR/GBP's correction from 0.8098 might be resuming which would probably target 0.7615 medium term resistance turned support. In other words, we could continue to see Sterling being relatively stronger than Euro for a while. Euro, on the other hand, was additionally pressured after industrial orders dropped more than expected by -3.5% mom, -4.4% yoy in May. Canadian dollar continues to trade with a soft tone after mixed CPI report. Headline CPI in Canada surged sharply from 2.2% yoy to 3.1% yoy in Jun, beating expectation of 2.9%. Core CPI, though, was unchanged at 1.5% yoy, below consensus of 1.6%. Australian CPI released overnight jumped from 1.3% to 1.5% qoq in Q2, with yoy rate pushed up from 4.2% to 4.5%, above expectation of 1.3% qoq, 4.3% yoy. The core CPI, RBA trimmed mean jumped to 1.2% qoq, 4.3% yoy, hitting a 17 year high. Nevertheless, Aussie continues to retreat on dollar's broad based recovery. EUR/USD Mid-Day Outlook Daily Pivots: (S1) 1.5856; (P) 1.5892; (R1) 1.5958; More EUR/USD's fall from 1.6038 extends further to as low as 1.5777 today and at this point, intraday bias remains on the downside as long as 1.5797 minor resistance holds. As discussed before, further decline could now be seen to 100% projection of 1.6038 to 1.5783 from 1.5944 at 1.5689. Nevertheless, rise from 1.5302 is still expected to resume as long as downside is contained above 1.5611 support. Above 1.5797 minor resistance will turn intraday outlook neutral first. Further break of 1.5944 resistance will bring retest of 1.6038 high first. However, note that a break below 1.5611 support will indicate that rise from 1.5302 has completed and open up a few bearish scenarios that focuses on 1.5284/5301 support zone. In the bigger picture, medium term consolidation from 1.6019 should have completed at 1.5302 already. Decisive break of 1.6019 record high will confirm that medium term up trend has resumed and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. However, note that sustained break below 1.584/5301 support zone will argue that EUR/USD has completed a double top formation and suggest that a medium term top is in place and deeper decline should then be seen to 1.4309/4966 support zone.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
01:30	AUD	Australia CPI Q/Q Q2	1.50%	1.30%	1.30%
01:30	AUD	Australia CPI Y/Y Q2	4.50%	4.30%	4.20%
08:30	GBP	BoE Meeting Minutes (Vote)	1--7--1	1--8	1--8
09:00	EUR	Eurozone Industrial orders M/M May	-3.50%	-1.30%	2.50%	2.00%
09:00	EUR	Eurozone Industrial orders Y/Y May	-4.40%	1.90%	11.70%	12.30%
10:00	GBP	U.K. CBI industrial trend Jul	-8	-5	1
11:00	CAD	Canada CPI M/M Jun	0.70%	0.50%	1.00%
11:00	CAD	Canada CPI Y/Y Jun	3.10%	2.90%	2.20%
11:00	CAD	Canada CPI core M/M Jun	0.10%	0.10%	0.30%
11:00	CAD	Canada CPI core Y/Y Jun	1.50%	1.60%	1.50%