- Claimant Count Change + MPC Meeting Minutes (GB, 09:30 GMT)
- BoC Monetary Policy Report + Interest Rate Decision (Can, 15:00 GMT)
- BoC Gov Carney Speaks (Can, 16:15 GMT)
Sales of U.S. existing homes unexpectedly fell in December as supply shrank, underscoring the hurdles for an industry seeking to strengthen its recovery even as it completed its best year since 2007. Purchases fell 1 percent to a 4.94 million annual rate last month, figures from the National Association of Realtors showed yesterday in Washington. Other news is that Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and almost half are curbing their investments in response to continuing budget battles, a Bloomberg poll shows.
The Bank of Japan (8301)’s decision to hold off on fresh monetary stimulus for a year puts pressure on the Abe administration to revive growth through fiscal measures and risks capping losses in the yen that aid export competitiveness. Governor Masaaki Shirakawa, whose term ends in less than 11 weeks, yesterday agreed to set the 2 percent inflation target urged by Prime Minister Shinzo Abe, while stopping short of immediate action to achieve it. The BOJ plans to start open- ended asset purchases in January next year.
Bank of England Governor Mervyn King said it may be appropriate to review the U.K.’s inflation- targeting regime, and that government measures to strengthen the economy are needed to underpin a “gentle recovery.” In a wide-ranging address, King said the BOE is ready to add more stimulus if needed, though monetary policy is not a “panacea” and more must be done to strengthen banks and implement structural reforms.
King said his view remains that a long-run 2 percent inflation target “should be an essential part of our macroeconomic framework,” and it would be “irresponsible to lose that.” He added that the BOE has the flexibility to allow above-target inflation during slumps.
EUR/USD: The EUR/USD traded flat yesterday as improving German economic sentiment data was outshined by the weaker-than-expected U.S. home sales. Market sentiments were also affected after the Bank of Japan said it would start open-ended asset purchases from banks to stimulate the economy but not until 2014. Today, the pair was trading slightly lower at 1.33109 at the time of writing as market participants were disappointed by the decision of BoJ.
Sentiments will continue to drive the market. On the European session only the French Business Survey will be released, which expected to come at 90 compared to 89 registered previously. Later in the day, on the American session, the U.S will release its MBA Mortgage Applications (WoW), the Redbook (MoM), the House Price Index (MoM), the 4-Week Bill Auction, the API Weekly Crude Stock and the API Weekly Gasoline Stock.
All these soft economic data is likely to bring some fluctuations intra trade. Investors should be cautious and focus on the latest developments in the U.S regarding the debt ceiling to get visibility. The resistance level is at 1.33985 and the support level is at 1.32502.
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GBP/USD: The GBP/USD was trading lower at 1.58312 at the time of writing ahead of some important economic data and news in the UK. The country will release its Average Earnings Index + Bonus, the Claimant Count Change and the MPC Meeting Minutes. The number of jobless- benefit claimants probably rose by 500 in December, according to the median forecast of 28 economists in a Bloomberg News survey. King said yesterday policy makers will continue to assess the merits of an interest-rate reduction, already at a record-low of 0.5 percent, and the need for further bond purchases.
“Be in no doubt that we are ready to provide more stimulus if it is needed,” he said. King added that prolonged use of monetary stimulus may have side effects, including pushing down long-term bond yields to “unsustainably low levels” that pose a risk to financial stability. He said authorities must press on with measures to improve confidence in banks, boost the supply potential of the economy and rebalance domestic demand away from countries with trade deficits to those with surpluses.
In addition, the Prime Minister David Cameron will deliver a speech today, in which he will promise a referendum on whether Britain should leave the European Union, allowing U.K. voters to decide on breaking up the 27-nation bloc. Investors should monitor all the news and data in the UK to get visibility on the movement of the pair. Later in the day, the U.S will release its MBA Mortgage the Applications (WoW), the Redbook (MoM), the House Price Index (MoM), the 4-Week Bill Auction, the API Weekly Crude Stock and the API Weekly Gasoline Stock. The resistance level is at 1.58923 and the support level is at 1.57663.
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Oil (WTI): Oil traded near the highest price in four months as German economic sentiment data improved and as speculation that the U.S. will lift its debt limit. President Barack Obama’s administration said it welcomes a move by House Republicans to vote today on lifting the nation’s debt ceiling through mid-May. The commodity was trading slightly lower at 96.490 at the time of writing as the U.S. crude stockpiles probably rose last week, according to a Bloomberg News survey before a government report today.
The U.S. crude stockpiles probably rose by 2.5 million barrels to 362.8 million in the seven days ended Jan. 18, according to the median of seven analyst estimates before a report from the Energy Department. Market sentiments remain fragile and investors should be cautious when dealing on the commodity. News on the debt ceiling in the U.S should also be closely monitored to get more visibility on the market. The resistance level is at 97.513 and the support level is at 95.360.