Forex markets eye inflation discourse from Trichet and Bernanke
The ECB left interest rates unchanged at 1 percent. PMI services data from the UK lift the pound. The AUD shrugged off impact due to recent extreme weather conditions and finds support on better than expected data.
ECB leaves interest rates unchanged
EUR/USD dips lower as ECB kept interest rates unchanged. At the time of writing the currency pair is making new daily lows at 1.3656, breaking first support and second support at 1.3764 and 1.3719 respectively. In the news conference following the rate decision Trichet’s comments with regards to short term inflation acknowledged that upward pressure is expected but should remain in check over a “policy relevant horizon”. He also added that medium to longer term expectations for inflation remain “firmly anchored”.
Meanwhile we had positive results from the Euro Zone earlier on today, with PMI services from France, Germany and the Euro Zone as a whole coming out better than expected. Spain also auctioned off around 3.5 billion euros of 2013 and 2016 bonds – yields paid were lower and the bid-to-cover ratio (which measures demand) was slightly lower but still at acceptable levels.
The British pound gathers support on the back of stronger PMI services data
PMI services data for the UK came in at 54.5 vs. an expected 51.0 and a previous 49.7. The better data further reinforced expectations of sooner rate hikes and these were priced in to GBP’s trading. The British pound was up 0.46 percent against the Euro, and 0.21 percent against the USD up till 1200 CET.
Aussie shrugs off cyclone worries
The Australian Dollar was up a total of 1.68 percent against its major counterparts. Earlier this morning data from Australia came in better than expected and this helped give strength to the currency.
Trade balance came in at 1981M vs. and expected 1600M and monthly figures for Building approvals came out at 8.7 percent vs. an expected 1.3 percent.
Despite the Cyclone has left its damaging effect on parts of Australia, the scale of the damage was not as wide as had been originally expected.
This article has been prepared by Rudolf Muscat, Senior Trader at RTFX Ltd.