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Will unreliable boyfriend Carney stand us up again?

Will unreliable boyfriend Carney stand us up again?

Sterling saw an end to the rally against the Dollar yesterday following a final UK Services PMI figure of 47.4 that showed no further decline since the “flash” estimate earlier in the month. It is, however, the weakest monthly figure since July 2009. This caused GBPUSD to meet resistance at 1.3350, and fall slowly back towards 1.3300 through to the end of the European trading session.

Sterling has weakened ahead of today’s Bank of England (BoE) interest rate decision. Markets are expecting the Monetary Policy Committee to cut the Bank Rate by 25bps to 0.25%. There are also rumours of the potential for a further £50bn of quantitative easing and other direct measures such as extending the funding for lending scheme.

The BoE also has to protect its credibility after making it clear that it would take action in July or August. There will therefore be high volatility during the monetary policy announcements and the following press conference from BoE Governor Carney.

Ahead of Friday’s employment data, confidence in the US employment sector was reinforced yesterday by a positive ADP non-farm number of 179k. This lent extra oxygen to the Dollar, helping the USD Index to rebound from multi-week lows. Although ISM non-manufacturing PMI printed down at 55.5, there was a small increase in the new orders component which helped bolster sentiment surrounding the general outlook. Overall, the Dollar managed to reverse some losses against the Euro, bringing EURUSD down from 1.1268 to 1.1140.

There is more US employment data due today with Unemployment Claims released at 1:30pm. This will be followed by US Factory Orders for June, however the figure may have a muted impact on the market due to events in the UK.

The Euro weakened versus the Pound for a second day running as the single currency recorded losses of 0.55% and ended the day at around the 1.1954 levels as it failed break strong resistance levels at 1.1975. The Euro Markit services PMI was revised marginally upwards to 52.9 from 52.7 as the German economy continues to outperform other major economies.

Data to watch: 12pm UK BoE Interest Rate Decision, Votes, Asset Purchase Facility, Monetary Policy Summary, BoE Meeting Minutes, Quarterly Inflation Report. 12.30pm BoE Governor Carney’s speech. 1.30pm US Initial Jobless Claims. 3pm US June Factory Orders.

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