The build-up to the BoE decision has kept the pound down today. On Thursday the BoE is expected to signal a pause in quantitative easing by abstaining from any boost in its 200 billion pound asset buying programme but many believe this will have to be confirmed before sterling can move onward and upward.
Yesterday a survey unexpectedly showing UK manufacturing activity at a 15-month high gave sterling a brief boost. This morning at 0945 GMT the pound drifted around 1.595 against the dollar and 1.145 versus the euro. Data from the US could determine which way sterling will head later today whilst political uncertainty continues be a factor in its poor performance.
US Dollar – US Markets
Yesterday the dollar extended gains against the yen and pared losses against the euro on after data showed business activity in the US manufacturing sector came in stronger than expected in January. The dollar has been sold off recently which is partly due to growing optimism about the outlook for the US economy.
Looking ahead to today, the most important economic indicator scheduled to be released from the US is the Pending Home Sales at 1500 GMT. Traders will be keeping their eyes on this announcement as stronger than expected results may boost the greenback in the short-term. At 0955 GMT the dollar traded at 90.75 against the Japanese yen.
Euro – European Markets
The Euro-Zone manufacturing sector grew at its fastest pace in two years last month. However, the outlook on the single currency seems gloomy as Greece's fiscal woes remain in the forefront of investors' minds. Whether or not the Euro-Zone monetary authorities will bail out the troubled country remains to be seen.
This morning the euro traded at 1.3935 against the dollar at 1007 GMT.
Other Currencies – Highlights
The Reserve Bank of Australia decided today to keep interest rates steady at 3.75%, while it was highly forecasted that the bank will raise borrowing costs by 25 basis points to 4.00%.
The yen weakened against all of its major counterparts as optimism about the global economic recovery gaining momentum stimulated demand for stocks and other higher-yielding assets.
Dollar Weakens as Fed Rate Cut in July Seems Imminent