Yellen nomination boosts USD as talks abound that US debt ceiling may be raised

The GBP has had a big fall in the last couple of days and is still on this trend this morning, mainly due to on-going issues in the US and some poor data releases thus far. Today, we have the BoE rate decision and asset purchases announcement. The market is expecting the BoE policy to stay unchanged as the economy is still on the rise.

The euro, following the risk-off trade of the last few days, can’t seem to find any new ground to be positive. Today we have the ECB monthly bulletin. There is not much expected from this, just the data they used to make their last rate decision, which is already in the market.

Later this evening, Draghi is talking so there could be some more news about the ECB’s next policy move as it is seen to be the easing of liquidity in the form of new Long Term Loans rather than cutting interest rates. ECB’s Constancio says they are not actively preparing new LTROs. So one to watch for signs of this being used.

The USD has had a very good week so far, even with a possible default, while the government enters a ninth day of shutdowns. Yesterday Obama officially announced Yellen as his nomination for Bernanke’s replacement and said that Bernanke will leave. This gave new optimism that the Fed is in good hands and helped the USD out of its sell-off mode since the shutdown began. The FOMC also confirmed that most of the Fed officials were expecting QE tapering this year.

To add to the strength of the dollar, Obama and the House of Republicans are said to be considering a short term US debt ceiling increase. If this happens nothing will be resolved; it just means that the US will not default on its bills on 17th October and then this will all start again. In the meantime, it was reported that the US Treasury and Fed are planning for a possible default as both sides are staying strong on the course.

What we could expect from today is news from the US about a resolution on the debt ceiling and shutdown. The unemployment claims are also due out, which, if better than expected, should result in the USD continuing to rally this week.

EUR/USD

Supports 1.3485 1.3450 1.3380 | Resistance 1.3530 1.3555 1.3605

USD/JPY

Supports 97.30 97.00 96.70 | Resistance 97.85 98.00 98.25

GBP/USD

Supports 1.5920 1.5875 1.5850 | Resistance 1.5965 1.6000 1.6060