• Share this:

Top Stories

• Allen Stanford disappears as SEC accuses him of $8 Billion fraud
• Asia equities fall by 1% but Europe holds steady despite warnings from banks
• GM and Chrysler ask for more government aid
• Oil below $35/bbl
• Gold holds nears highs at $971/oz

Overnight Eco

• AUD MI Leading Index -0.4% vs-0.6% last
• AUD Quarterly Retail Sales 0.8% against 1.0% expected
• GBP MPC Meeting Minutes 9-0 for Quant easing
• GBP CBI Industrial Order Expectations -56 vs. -45

Event Risk on Tap

• CAD Wholesale Sales expected at -1.5%
• USD Building Permits expected at 0.53M
• USD Housing Starts expected at 0.53M
• USD Import Prices expected at -1.4%
• USD Capacity Utilization Rate expected at 72.6%
• USD Industrial Production expected at -1.3%

Price Action

• USD/JPY bid through 9250 on better equity trade in Europe
• AUD/USD runs back to 6400 on short covering be retrest off highs
• GBP/USD pushed to 1.4100 on quantitative easing news
• EUR/USD rangebound below 1.2600 driven mainly by EUR/GBP flows

On a night when the rest of the G10 currencies consolidated their losses in listless, event free trading, cable was the main source of action dropping 200 points from its highs on news that Bank of England voted unanimously for quantitative easing. The BOE voted 9-0 to expand its monetary policy initiatives beyond rate cutting and 8-1 to lower rates by 50bp with Blachflower once again calling for 100bp cut.

In a released statement the MPC noted, ”To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy measures. Therefore the committee unanimously agree that the governor should write on its behalf to the chancellor to seek authority to conduct purchases of government and other securities, financed by the creation of central bank money.''  

As we wrote earlier, “The move towards quantitative easing   is a clear signal that the BoE is running out of room with respect to standard monetary policy protocol as UK rates inch ever closer to the zero percent level. With interest rates levels at record lows, further cuts are unlikely to have much stimulative impact, forcing Mr. King and company to resort to quantitative easing as a way to infuse liquidity and credit into the market.”

Over the long  run, the primary bet between pound bulls and bears remains one of growth versus devaluation.  If BoE’s  move towards quantitative easing is able to stabilize the UK economy and revive its stagnant services sector, cable will bounce irrespective of further expansion of the central bank’s balance sheet. If however, demand remains dormant while CPI continues  to hover near the 3% annual level,  sterling will no doubt see more selling pressure as traders will view tonight’s announcement as nothing more than an exercise in dilution and devaluation.  That’s why most FX market participants will pay very careful attention to UK micro economic data in the next several  months watching for any signs of improvement. Today’s release of CBI Industrial trends which printed at -56 versus -45 eyed was hardly a boost of confidence in future growth.

Meanwhile the EUR/USD range traded most of the night as traders continue to grapple with the issue of exposure of the region’s banks to Eastern European debt.  The pair appears to have found temporary support at the 1.2500 level, but remains extremely vulnerable to further probes to the downside. A break of 1.2500 is likely to trigger a cascade of stops and it will interesting to see if the pair tests that level during the North American session.

FX Upcoming

Currency	GMT	EST	Release	Expected	Prior
CAD	13:30	8:30	CAD Wholesale Sales	-1.5%	-1.6%
USD	13:30	8:30	USD Building Permits	0.53M	0.55M
USD	13:30	8:30	USD Housing Starts	0.53M	0.55M
USD	13:30	8:30	USD Import Prices	-1.4%	-4.2%
USD	14:15	9:15	USD Capacity Utilization Rate	72.6%	73.6%
USD	14:15	9:15	USD Industrial Production	-1.3%	-2.0%

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.