When
the governor of the Bank of England, Mark Carney, made his speech at the London
Guildhall where he remarked that interest rate rises in the UK might “take
place sooner than the market expects”, his words caused a surge in the
value of Sterling. That was last June 12th. But since then the
market seems to have come to the conclusion that this rise was premature, to
say the least.
There
has been a significant retrace, back all the way to the bottom of the dominant trend
channel (see chart). There has even been something of an uptick since the rate
hit the line marking this level. The question now is to whether or not the
upward trend will be renewed in a convincing manner.
Tomorrow
the Bank of England Monetary Policy Committee (MPC) will give its latest interest
rate decision announcement, and make its intentions known with regard to its Asset
Purchase Facility, or the UK version of Quantitative Easing. These events just
might have some bearing on the matter.
Euro decline accelerates
The
Euro against the US dollar (EURUSD) has been in decline, something that has
accelerated in the last days, after the rate battled with the 200 Day
Exponential Moving Average (EMA) for a while. Since it finally broke away from
the influence of this support turned resistance it seems almost as if the market participants
that move this, the most traded of all currency pairs, have been anticipating
something of import from Mario Draghi and his colleagues at the ECB.
Whatever
it is it might come tomorrow when that institution gives its interest rate decision,
monetary policy statement and press conference.
That’s
right folks, we have two heavy hitter central banks on stage tomorrow (Thursday),
the BoE and the ECB, and this comes as the August holiday period starts to get
into full swing. Can we expect fireworks?
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