EUR/USD Little Changed Ahead of Bank of England Decision
Frankfurt (May 11) EUR/USD is marginally higher ahead of this morning’s interest rate decision from the Bank of England (BoE). The pair is currently trading at 1.0870, a gain of 0.04% over Wednesday’s North American close.
The range is expected to remain narrow ahead of the 07:00 ET announcement. The BoE Monetary Policy Committee will announce its latest decision on interest rates as well as bond purchases. The quarterly inflation report will also be released and Bank Governor Carney will hold a press conference. No change in policy is expected, with rates remaining at 0.25%. However, traders will be watching for any comments on how recent Sterling strength has impacted inflation.
On the upside, resistance for EUR/USD is currently being met at the 1.0900 level. Above this level, the next-higher resistance is at the mid-point of Monday’s long red candle on the daily chart, near the 1.0970 area. On a break above 1.0970, the target would become Monday’s 1.1021 high, which represents the high of a bearish engulfing pattern on the daily chart.
Initial support for the pair is at the 1.0850 level, followed by 1.0820, which represents the upper boundary of the gap established as a result of the sharp move higher on April 24th, when the Euro surged in response to the first round of the French Presidential elections. This level is also being reinforced by the pair’s 200-day moving average.
At present, the gap is expected to remain intact, with 1.0820 providing a solid area of support. However, if the upper boundary of the gap does give way, a complete fill of the gap with a move to within reach of 1.0700, cannot be ruled out.
EUR/USD experienced little reaction to European Central Bank (ECB) President Mario Draghi’s speech on Wednesday. In remarks to the Dutch Parliament, ECB President Draghi confirmed that the Bank was not in a rush to raise interest rates or wind down the ECB’s 2.3 billion Euro bond-buying program. According to Draghi, underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend. His commentary overall was little changed from the ECB press conference, but remarks from ECB members in the weeks ahead will be watched closely. The ECB’s Constancio spoke earlier today. However, his comments were not market moving.
In the US, following the BoE announcement, April PPI will be released at 08:30 ET. A reading of 0.2% is expected, following a reading of -0.01% for March. Weekly jobless claims will also be reported at 08:30 ET. On Friday at 08:30 ET, the US will release both CPI and Retail Sales. CPI is expected to show a reading of 0.2% for April, following a prior reading of -0.3%. A stronger than expected reading, especially for underlying inflation, would boost the case for a rate hike in the US in at the June 13-14 FOMC meeting. Retail Sales is expected to come in at 0.6% following a reading at -0.3% in March. This report will be watched closely for signs of improvement.
In the Eurozone tomorrow, German CPI and GDP (Q1, flash) will be released at 02:00 ET. The GDP numbers are expected at 0.7% quarter-over-quarter and 1.7% year-over-year, from 0.4% and 1.2%, respectively. Eurozone Industrial Production is then due at 05:00 ET.
Source: EconomicCalendar
