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Forex traders will closely be reading the minutes from the last Bank of England MPC meeting

Article By: ,  Financial Analyst
July 20, 2011 5:58 PM

Forex traders will closely be reading the minutes from the last Bank of England MPC meeting to gauge whether any indication was given to potentially extend quantitative easing for a second time, in order to encourage growth.The focus remains on developments on the Greek debt crisis today.

US debt ceiling
Hopes that the US will avert a default by the deadline of August 2 grew overnight as President Obama gave optimism that the Congress could reach an agreement in the near future with a proposal that would combine $3.7 trillion of tax increases and spending cuts. The plan also called for changes to the US tax code and changes to the Social Security System. The so-called Gang of Six seem to have agreed such changes with The President, although acknowledging that this has been a difficult debate between the Republicans and Democrats, calling this progress ‘a very significant step’.
EUR/USD
Range: 1.4133-1.4193
Support: 1.4050
Resistance: 1.4250
The euro and dollar seem to be stuck in a tug-of-war and traders are expecting more of the same today as we await this week’s main event: tomorrow’s European summit meeting. Although I’d expect choppy illiquid markets as comments from the meeting are released, I stick to the view that events tomorrow certainly won’t allow the European debt situation to just disappear, as mentioned yesterday by Angela Merkel: ‘The Euro meeting on Thursday will not be one big step or spectacular solution that solves all problems.’ The markets could expect to continue range trading until the main event, initially between 1.4130-1.4230.
GBP/USD
Range: 1.6099 – 1.6140
Support: 1.5800
Resistance: 1.6240

 

The key event today will be the release of the BoE minutes. Whilst it seems unanimous that the voting pattern will remain unchanged at 7-2 (policy rate) and 8-1 (asset purchase decision), the market will be looking for any discussion on the extension of QE, given the recent bout of weak data from the UK. Another member opting to vote for more QE could allow GBP to test recent range lows of 1.5800-1.5825.

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