The Bank of England hiked rates 25bp to 5.50%; the sterling dropped 0.8% against the dollar. ECB President Trichet emphasized the need for �vigilance� to curb inflation, a term known to be used before rate hikes, expected to come in June.
News and Events:
The Bank of England hiked rates 25bp to 5.50% as forecasted and gave little indication of future moves. With market expectation met and rising inflation concerns in the US, the sterling dropped 0.8% against the dollar in yesterday’s session. The cable will be further sensitive to economic data coming out this month and next.
ECB President Trichet emphasized the need for �vigilance� to curb inflation, a term known to be used before rate hikes. However, with the rate hike prediction fully priced in the Euro, and investors seeing no need for any further rate hikes after June, the sell-off begin with the dollar rising to a one-month high.
Today’s most interesting chart is USDCAD. With a 100% retracement from 1.1301 to 1.1876 and back, the pair is ready for a new rally. Strong support has been found at the bottom, the pair has broken out of the downward channel and weaker than expected economic data has spun USDCAD out of the down trend.
Today’s Key Issues (time in GMT):
7:00 GBP HBOS Plc House Prices, seasonally adjusted (MoM) (APR) 0.8% vs 1.0%
7:00 GBP HBOS House Price 3Mths/Year (APR) 10.6% vs 11.1%
11:00 CAD Net Change in Employment (APR) 18.0K vs 54.9K
11:00 CAD Unemployment Rate (APR) 6.1% vs 6.1%
12:30 USD Producer Price Index (MoM) (APR) 0.6% vs 1.0%
12:30 USD Producer Price Index (YoY) (APR) 3.1% vs 3.2%
12:30 USD PPI Ex Food & Energy (MoM) (APR) 0.2% vs 0.0%
12:30 USD PPI Ex Food & Energy (YoY) (APR) 1.8% vs 1.7%
12:30 USD Advance Retail Sales (APR) 0.4% vs 0.7%
12:30 USD Retail Sales ex-Autos (APR) 0.5% vs 0.8%
14:00 USD Business Inventories (MAR) 0.2% vs 0.3%
The Risk Today:
EurUsd: fell all the way down to the next support at 1.3465, the next key level. Resistance at 1.3542 holds firm now.
GbpUsd smashed through major resistance at 1.9845 and hit a low of 1.9771 yesterday. The tide has temporarily changed for the cable, and traders now eye a break of 1.9730 for a move to the lower trend-line at 1.9527 in the near-term. Resistance found between 1.9964 through to 1.9999.
UsdJpy although finishing down for the day, the pair managed to score a new high at 120.54, and keeping with higher lows as well. USDJPY is finding strong support here at the lower trend-line as it eyes a big move upwards to 121.81. Support at 119.55.
UsdChf making new highs as it breaks away from the downward channel for the third day in a row. Major initial support found at 1.2134; a close below this level would be quite bearish, however the new trend is up. Resistance and target of 1.2287 intact.
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Resistance and Support:
By James Brandt - ACM Advanced Currency Markets, Geneva, Switzerland