Bank of England Minutes Unlikely to Boost GBP

Bank of England minutes on tap, Greek re-profiling talk and weak US data help euro, and Australian consumer confidence.

This mornings release of the Bank of England May minutes arent likely to shed too much light on the thinking of the MPC at its June meeting given the recent change in the make up of the committee, with hawk Andrew Sentance leaving and Ben Broadbent joining.

Yesterdays surprise rise in UK CPI to 4.5%, and core CPI to record highs of 3.6% shouldnt really have been too much of a surprise given the recent record high oil price, and tax rises in the budget.

Nonetheless, GBP did rise sharply initially before slipping back again as the markets digested the fact that the Bank of England would still be in no hurry to raise interest rates due to as Mervyn King articulated earlier this month, a highly indebted consumer. The fact is the current mathematics of the voting patterns on the committee make any rate rise unlikely in the near term while we will need at least one meeting to determine new member Ben Broadbents policy take, is he hawkish or dovish?

GBPUSD resistance remains around yesterdays highs at 1.6300, near the 55 day MA.

The single currency had a slightly better day yesterday, more as a result of some pretty poor US economic data, and despite an admission from Luxembourg PM Jean-Claude Junckers that soft restructurings or re-profiling of Greek debt may be required. What this means is that the bailout terms could be extended, thus putting the day of reckoning off until further down the line. While it is an exercise in semantics it is at least an acknowledgement of some joined up thinking even if it is technically a default. The weakness in the US dollar however continues to underpin in the short term.

EURUSD resistance comes in around the 55 day MA at 1.4285, with a close above required for further gains to unfold towards 1.4380.

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AUD continues to retain its bid tone against the US dollar, holding above the 1.0500 level where there is significant support. However weakness in recent economic data underlines the recent reticence of the RBA to increase rates after data showing that wages rose by only 0.8% in the first quarter against expectations of 1.1%. Furthermore Westpac consumer confidence in May declined an unexpected 1.3%, suggesting some consumer caution in the face of concern about higher rates.

By KM - AshrafLaidi.com Staff