Another chorus of hawkish rhetoric was heard from ECB officials today, but the effect on the common currency was limited. Trichet emphasized again that ECB’s focus is on price stability. European Commission also revised up inflation for 08 and 09 from 3.2% to 3.6% and 2.2% to2.4% respectively. However, the effect was countered by downward revision in the growth forecast, which saw 08 and 09 growth revised down from 1.8% to 1.7% and from 2.1% to 1.5% respectively. Euro continues to trade in tight range against dollar and yen. On the other hand, Sterling was once again lifted by strength in EUR/GBP and GBP/JY cross and resumes it’s rebound against dollar.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.9723; (P) 1.9806; (R1) 1.9936; More

Cable’s rise from 1.9676 resumes today and surges to as high as 1.9938 so far. At this point, intraday bias remains on the upside as long as 1.9781 holds. Outlook remains unchanged. Choppy fall from 2.0391 should have completed in form of a falling wedge at 1.9599. Rise from 1.9599, which will be confirmed as resumed on breaking of 1.9997/2.0029 resistance zone, will extend further to 2.0391 or high to continue the corrective rebound from 1.9337. Meanwhile, below 1.9781 will turn outlook mixed again.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. Recent price actions suggest that rebound from 1.9337 is still in progress and is set to have another rise to 2.0391 and above. However, strong resistance should still be seen at with 61.8% retracement of 2.1161 to 1.9337 at 2.0464 and bring completion of the corrective rebound. On the downside, break of 1.9599 will revive the case that rise from 1.9337 has completed with three waves up to 2.0391 and will encourage retest this low.

Forex News Digest

• Monday’s Events: Cdn Provincial Accounts, U.S. Housing Vacancies, German CPI
• German States See Decline in CPIs In April
• ECB’s Trichet Says It’s "Crucial" that Policy Be Focused on Price Stability
• Stronger Euro Has Dampened Food, Energy Costs, Says EU’s Almunia (Update)
• Inflation Too High, ECB Can’t Afford to Be Complacent, Says ECB’s Liebscher
• Euro Appreciation Harming French Firms, Says France’s Lagarde
• European Market Update: European Bonds, Equities Higher
• EU Commission Revises Down Euro Zone Growth, Revises Up Inflation Forecasts
• GfK German Consumer Confidence Rises Unexpectedly in May
• Japanese Large Retailers’ Sales Surprise to the Upside in March
• Dollar Slide Drives Burgeoning U.S. Deficit as Japanese Desert Treasuries
• Bernanke May Have to Emulate Volcker to Avoid Being Tagged Another Burns
• Bank of America Says Sell Dollar as Federal Reserve Lowers Interest-Rates
• Australian, New Zealand Dollars Gain on Gold; Signs Credit Crisis May End

More Forex News

Economic Indicators Update

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