Dollar dips again

The GBP/USD and EUR/USD and have gained ground as the rally in the greenback has lost its momentum.

US dollar bills
Source: Bloomberg

Sterling awaits BoE minutes

The minutes from the Bank of England’s meeting in December at 9.30am (London time) will be the highlight of the trading session today, though as Alastair McCaig stated the market is not expecting any change to the voting breakdown. Out of the nine members on the monetary policy committee, two are anticipated to be in favour of voting for an interest rate rise, and the remaining seven will vote to hold steady. The two hawks on the Monetary Policy Committee have been further isolated by inflation falling to a 14-year low in the UK, but the figures were not so bad as to warrant a change of vote.

The pullback in the US dollar, due to profit taking, has brought about a deceleration of the [currencies:GBPUSD:GBP/USD]]’s decline, but the downward bias still holds. Resistance is still held by $1.52, and if it continues the downside support at $1.51 will be brought into play. If the $1.52 level is breeched to the upside it will consequently act as support, and the $1.5260 region will be the target. 

Euro awaits ECB meeting

We are just over one day away from the European Central Bank meeting, and the single currency is holding up relatively well. The speculation that Mario Draghi will announce a quantitative easing scheme tomorrow has been growing for months, but will the easing policy be enough to satisfy the market? The original size of the bond buying scheme rumoured was €500 billion, but there have been whispers of up to €700 billion. The market suggests a €500 billion government bond buying programme would not be sufficient to stimulate economic activity, and would only provide short-term relief for the euro. The EUR/USD pair has been trapped in a downward trend for nearly nine months but a small recovery is in sight should Mr Draghi’s stimulus come in at the low end of estimates. A figure closer to higher estimates might expect see a continuation of the downward trend in the pair, however.

At 1.30pm (London time) the US will reveal December’s building permits and housing starts data, and the consensus is for a monthly rise in both reports. If expectations are met it should renew the US dollar rally.

The EUR/USD pair has been trading sideways this week, with resistance coming into play at $1.16. Should the metric be cleared it will become support and the 200-hour moving average of $1.1707 will be the target. If resistance holds at $1.16 the downside support at $1.15 will be brought into play.

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