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Grabbing the headlines was Fed member Richard Fisher who got the ball rolling on taper talk after saying it could happen next month during a speech in Melbourne. He also added that monetary accommodation was getting riskier by the day. Meanwhile, Dennis Lockhart said the discussion about whether to taper could well take place at the December meeting, although he added he’d like to see a move back towards 2% first.
The rest of the week will continue to be dominated by Fedspeak, with the highlights being Ben Bernanke and Janet Yellen. The federal budget balance data due out in US trade is the only release on the calendar to look out for.
Cable in focus ahead of inflation report
The pound will be one to watch today, with plenty of action on the UK economic calendar. At 20.30 AEDT we get the claimant count change, unemployment rate and average earnings data. The market is looking for 33,200 jobs lost and for unemployment to drop to 7.6%. Average earnings are expected to grow 0.7%. At 21.30 AEDT we get the BoE’s inflation report and Governor Mark Carney speaks. Yesterday’s disappointing UK CPI reading (2.2% versus 2.5% expected) set the tone for a weaker pound. As a result, today’s inflation report will shed more light on when we can expect policy tightening. There will be plenty of focus on the BoE and forward guidance as inflation for the UK falls and looks to becoming a bit more aligned with other major global economies.
Price action pointing to potential near term weakness
Heading into the data, GBP/USD has remained subdued with USD strength mainly to blame for the poor performance. Ever since cable broke the uptrend line on the daily, which had been in place from July to October, it has struggled to gain any traction with any moves higher being used as an opportunity to sell. GBP/USD is on the verge of breaking neckline support at 1.59. A sustained move through here should see the 200-day moving average at 1.5695 in play, ahead of the double top target of 1.5520. With quite a bit of activity on the calendar later today there is potential for some significant moves in cable.