Tuesday, August 5, 2014

Sterling at channel bottom | Euro decline accelerates

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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