GBP / USD fell sharply on Wednesday after the Bank of England said policymakers were unanimous in rejecting the higher interest rates, making the demand for the British pound. The nine-member Monetary Policy Committee voted 9-0 to keep their quantitative easing target at 375 billion pounds ($ 606 billion), according to the minutes of the October meeting 8-9pm.
Speculators have been trying to build a case for the central bank to start raising interest rates sooner than expected. This includes travel on the pound on the heels of better-than-expected economic data at the same time when the central bank had warned them to remain cautious.
In August unveiled BoE governor Mark Carney forward guidance on the future path of interest rates, saying the policy of the central bank would not consider raising borrowing costs until unemployment falls to 7 percent, something officials did not think would happen until at least 2016. Speculators, however, have taken on the drive the GBP / USD higher on almost every piece of positive economic news. This may have set them up for a serious correction.
Carney is tomorrow, can solve this problem and provide more guidance volatile trading conditions, in particular to make the downside is if he repeats his original position that rates would remain low for another three years.
After early session weakness in the EUR / USD fought back to unchanged for the day. The common currency was under pressure early after China revealed several major Chinese lenders from about $ 3.7 billion in bad debts written for the first six months of the year, higher than last year. Moreover, a spike in short-term rates in the Chinese put money under pressure demand for higher risk assets, leading to a sell-off in the Euro.
After the US Dollar could not follow-through to the upside, the Euro mounted an intra-day short-covering rally that has it in a position to post a new high for the year.
December gold traders took profits on Wednesday after a sharp rise yesterday. The move in gold was caused by a fall in the dollar after a weaker-than-expected jobs report. This move solidified the idea that the Fed would continue its stimulus at least until the end of the year. This put pressure on interest rates and the US Dollar.
The overnight flight to safety rally in the dollar because of the negative news from China gave gold investors an excuse to pare positions. Although this looks like a brief response to the news out, it could turn into a full-fledged correction as investors feel gold is overpriced. Stock market weakness may lose support and limit the market today continue to sell as stock markets hard in the end.
Heavy fund liquidation and technical selling pressure hit crude hard for the third straight day, taking a major support level at $ 98.17. Speculators began to slash positions on Monday before the US jobs report, but really poured on after the report came out weaker than expected. Contemporary reaction confirmed that investors feel that the economy is weak enough to lead to a decline in demand. This should increase supply levels.