The ECB meeting tomorrow will take centre stage with the US celebrating Independence Day today. The market seems split on whether the ECB will act tomorrow and cut rates or leave unchanged and try and force the European governments to address economic weakness via fiscal efforts rather than monetary policy. We have European services PMI data this morning which is the only possibility for a move and with the US on holiday all eyes will be on Bob Diamond squirming in front of the treasury committee on TV this afternoon.
Range: 1.5665 – 1.5694
Not much to add as we await the main event for the pound this week with the BoE announcement at noon tomorrow. As mentioned yesterday I think £50 billion of added QE is already priced to sterling. Today at 9.28am the UK services PMI is released with the consensus forecast being 52.9. Cable was capped again above 1.5730 yesterday but the catalyst looked to be a large EUR/GBP flow driving the cross up 35 pips.
Australian retail sales surprised to the upside overnight with a solid reading of 0.5% against the median estimate of 0.3% with upward revisions for April to 0.1% from -0.2%. The lifestyle currency managed to close above the 200-day moving average of 1.0254 and with the strong data further stops were triggered above 1.0300 but the follow through was limited to 1.0320 as the market settled back into a 30 pip range ahead of the US holiday today.