All eyes on Carney 8217 s inflation speech today will UK unemployment rate disappoint

A lower than forecast inflation figure yesterday for the UK sent cable falling around 100 pips on fears that this could hinder forward guidance and a rate rise with falling inflation.  This then gradually started to find bids as even though this was lower than the expected figure, the market is still expecting a drop in the unemployment rate today down to 7.6% and is a step closer to rate rises on the previous forward guidance mark of 7%.  The main feature today will be Carney talking about the inflation report. This will give the market a better idea of how the drop in inflation, predicted drop in unemployment and general recovery of the UK economy is all coming together.

The threat of US taper is still unclear if it is to be this year or next, with Fed’s Lockhart saying tapering could happen in December but is concerned about whether the US can maintain this job momentum.  Two other Fed officials were reported saying that aggressive policy is still needed in these uncertain times.

In data, the big sign to look out for in the coming weeks is the decision on tapering, with the majority still expecting March 14.

In Europe, ECB’s Asmussen and Nowotny were reported saying that they see room to cut rates further. They have also noted that the inflation wasn’t the worry but the stalling eurozone economy was the bigger concern.

USD/JPY is getting closer to the 100.00 mark, the first time since September 11 and September 13. The Nikkei has helped the rise here in the last 48 hours, with a 3 % rise.

EUR/USD

Supports 1.3425 1.3400 1.3340 | Resistance 1.3460 1.3500 1.3545

USD/JPY

Supports 99.20 98.70 98.35 | Resistance 99.80 100.00 100.25

GBP/USD

Supports 1.5850 1.5815 1.5750 | Resistance 1.5940 1.5975 1.6000