SereneLoi.com

Respite in USD Buying

The minutes of the BOE MPC meeting show a unanimous vote of 9-0 to keep both interest rates and QE asset purchases unchanged. Divergant dissenters Miles and Dale took the middle path and both opted for holding purchases at £200bn. The dovish overall tone gave the feeling that members were unwilling to permanently close the door on further expansion. Most pre-minutes analysis had predicted the BoE would shift language to a “pause” phase in February. However, there is now growing speculation that a further £25bn is still on the table. The realization weighed on the sterling. The GBPUSD had a choppy afternoon, trading up to 1.5994 before collapsing to 1.5930, while the EURGBP climbed to 0.8988. And on the data front, BBA loans for house purchases came in at 44.7k, higher than the 43k expected, while the Index of Services fell by 0.2% (3m/3m), more than prior month reading.

A wave of disappointing US economic data hurt the USD causing a swift reversal of the greenback euphoria. Currently, the USD is weaker against every G10 currency except the GBP. Personal spending fell to 0.5% vs. 0.7% expected and personal income dropped to 0.4% vs. 0.5% expected. In addition, US November new home sales came in at -11.3% to 355k vs 438k expected, with October’s figure at 400k (revised down from a preliminary 430k), while the U. Michigan Confidence fell to 72.5 vs. 73.8 exp figures. The EURUSD broke out of its 1.4240 to 1.4280 malaise, charging to 1.4345. Risk correlated trades had a revival, with crude prices rising 2.49% to $76.26bbl as EIA showed a bigger-than-expected drop in inventories, as imports fell.

#