Sterling to steal the show today

The FX markets remain in consolidation mode as equities and risk hold on to gains made last week, with the S&P teasing the 1850 level whilst the dollar index looks at the December low of 79.60.

News and events have been limited overnight; although US Treasury Secretary Jack Lew added to comments from Australia and Canada that the US was monitoring ‘considerable volatility’ in global markets. He suggested that discussions at this weekend’s G20 Summit in Sydney could centre around the recent emerging markets turmoil.

I expect the proud pound to take centre stage again today with the release of the BoE minutes and unemployment data.

The weaker CPI reading yesterday has fuelled ideas for a stronger retail sales  number on Friday, following a theme we saw last month that weaker discounted prices lead to increased sales.

I think the quarterly inflation report last week has given us all we need to know from the BoE on threshold mandates, so today I look for further discussion on what the Governor seemed to be drumming into us last week – ‘spare capacity’.

The unemployment rate will be keenly watched to ascertain whether we do indeed hit the magic 7% level.

I suspect that UK data, like the US, is going to be in a phase of weather distortion as I certainly can’t remember the last time it wasn’t raining.

In the US session today we see the latest PPI data at 13.30, along with comments from Fed speakers Lockhart and Bullard over the afternoon.

Then, tonight at 19.00 we get the FOMC minutes for the latest snapshot on the Federal Reserve’s thinking. The theme is likely to remain for the speed of taper as the FOMC stay unmoved by recent weather related data.

EUR/USD

Supports 1.3715-1.3685-1.3660 | Resistance 1.3785-1.3800-1.3830

USD/JPY

Supports 102.00-100.40-100.85 | Resistance 102.80-103.15-103.55

GBP/USD

Supports  1.6650-1.6600-1.6550 | Resistance 1.6745-1.6820-1.6880