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Forex snapshot

The dominant issue GBP/USD traders will be watching for this morning will be the latest Monetary Policy Committee voting. Rumors of eurozone stimulus circle the markets cooling the EUR/USD rise higher.

5,10 and 20 pound notes
Source: Bloomberg

GBP/USD unable to clear $1.62

When the two members of the MPC decided to change their vote to yes from no, the economic picture for the UK was very strong. Arguably, that picture still remains good but the erosion of confidence and the weakening backlog of economic data from the eurozone will be playing on the MPC member’s minds.

As the eurozone remains our largest trading partner the demise of its recovery might not instantly be felt but will no doubt start to dent the UK’s figures in the fourth quarter.

GBP/USD traders will undoubtedly have been increasingly factoring in the chances that interest rate rises for the UK will be later in the year than had previously been envisaged. In the short term, the 50-day moving average and the $1.62 level appear to be a hurdle that cable will not be able to clear.

Spot FX GBP/USD chart

Euro drops back to $1.27 region

For the third day this week there is almost no eurozone economic data. Considering how disappointing this has tended to be over the last six months this is may not be a bad thing. The last twenty four hours have seen increasing rumours that the European Central Bank will embark on a stimulus plan. How true this is remains to be seen but it has certainly boosted equities.

For the EUR/USD on the other hand the 50-DMA at $1.285 has proven to be a barrier to higher levels and a drop back to the lower $1.27 region has materialised.

Tomorrow will see a plethora of manufacturing and service PMI figures released for the eurozone and ahead of this EUR/USD bullishness could well be in short supply.

Spot FX EUR/USD chart

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