London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jun 17 09 11:06 GMT |

Further falls in stock markets is suggestive of more risk being taken off the table today as the market worries about the strength of the 'green shoots' of recovery. The AUD and the NZD have pushed lower vs the USD in line with this theme, though the yen has failed to make further progress vs the EUR or the USD. Sterling has been the biggest movers of the session, falling vs the USD and the EUR following the publication of the minutes of the BoE's June MPC meeting. EUR/USD failed to hold above the USD1.3920 level and is little changed from last night's close. Better than expected Apr Eurozone trade data at +EUR2.7 bln had little impact. The minutes of the June BoE MPC meeting show that there were 9:0 votes in favour of keeping rates at 0.5% and that the Bank sees tentative evidence that QE was beginning to work through the financial system. Overall, the tone of the minutes reflects caution. This is not surprising when considered in light of the plainly dovish May Inflation Report. However, given that sterling has reacted positively in recent weeks to better than expected economic data, the market was hoping for a slightly more optimistic outlook from the BoE. The theme of better than expected UK data was continued today with the release of the May unemployment data. Jobless claims rose by 39.3K well below the market consensus of 60K, while the ILO unemployment rate rose to 7.2% below the 7.3% consensus. A slowdown in the pace of layoffs is consistent with signs that the downturn is bottoming, though unemployment can be expected to keep rising for some months yet. EUR/GBP is rising back towards the 0.8540 level suggesting scope to 0.8600. The release of UK retail sales and PSNCR data tomorrow may enhance sterling's nervous tone. However, the relatively worse economic data stemming from the Eurozone recently suggests the pullback could offer a decent GBP buying opportunity. This afternoon the release of the US May CPI data is expected to show very weak inflationary pressures. This would strengthen the notion that Fed policy is set to remain bias towards growth for some time. The administration's plans on US regulatory reform will also be watched. Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.