GBP: Hawkish Talk Not Enough

Bank of England MPC members continued with hawkish talk on Thursday but it wasn't enough. McCafferty was upbeat on wage gains and earnings in comments to MNI, saying they can't be ignored. Yet cable traced out a bearish engulfing candle in a sign that if the pound wants to continue keeping pace with the US dollar, it will take upbeat economic data rather than words.

The first test comes Tuesday when we get the advance look at Q2 GDP. It's expected to show a healthy 0.7% q/q gain.

The other story that continues to unfold is oil weakness. WTI crude fell as low as $48.22 Thursday before a half-dollar bounce in Asia-Pacific trading. So far the Canadian dollar has been able to hold the crisis extremes but another day or two of oil declines will break its back.

Ashraf closed out a very successful EUR/CAD earlier today.

Some risk aversion crept into markets Thursday and that weighed on yen crosses but strong corporate earnings helped turn the tide.

We continue to keep a close eye on the euro after four straight days of gains. The momentum has begun to ebb and a minor double top has traced out just above 1.1000. Economic data could determine the kext move. Up first is the French Markit manufacturing PMI, which is expected at 50.8. That's followed by the German version, which is forecast to remain unchanged at 52.5.

Signs of a pickup in manufacturing or separate services surveys from Markit could highlight the early stages of a recovery and keep the big alive or a weak reading could dash hopes again.