The dollar gained versus major peers after retail sales rose in July for a fourth month and Federal Reserve Bank of Atlanta President Dennis Lockhart said policy makers may start to slow asset buying as soon as September.
The yen slid the most in nine weeks against the euro after a newspaper report said the Japanese government is weighing a corporate-tax cut.
EURO:
The euro remain under pressure despite data showing the economic activity of the bloc expanded 0.3% QoQ and thus leaving behind the recession.
EUR/USD eases towards $1.3230 (Aug 6 lows) after the US data release. Minor support comes at $1.3180 (Aug 2 lows), below - at $1.3080 (50% Fibo of the $1.2750 - $1.3400 rise). Initial resistance is around $1.3315 (session highs), then - at $1.3400 (Aug 8 highs).
POUND:
jumped higher after strong UK data.
UK BOE MPC minutes:
The Committee intends not to raise Bank Rate from its current level of 0.5% at least until the Labour Force Survey (LFS) headline measure of the unemployment rate has fallen to a threshold of 7%, subject to the conditions below. The MPC stands ready to undertake further asset purchases while the LFS unemployment rate remains above 7% if it judges that additional monetary stimulus is warranted. But until the unemployment threshold is reached, and subject to the conditions below, the MPC intends not to reduce the stock of asset purchases financed by the issuance of central bank reserves and, consistent with that, intends to reinvest the cashflows associated with all maturing gilts held in the Asset Purchase Facility. This guidance linking Bank Rate and asset sales to the unemployment threshold would cease to hold if any of the following three knockouts were breached: In the MPC’s view, it is more likely than not that CPI inflation 18 to 24 months ahead will be 0.5 percentage points or more above the 2% target; Medium-term inflation expectations no longer remain sufficiently well anchored; The Financial Policy Committee (FPC) judges that the stance of monetary policy poses a significant threat to financial stability that cannot be contained by the substantial range of mitigating policy actions available to the FPC, the Financial Conduct Authority and the Prudential Regulation Authority in a way consistent with their objectives.
The Governor then invited the Committee to vote on the propositions that: Bank Rate should be maintained at 0.5%; The Bank of England should maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion. Regarding Bank Rate, the Committee voted unanimously in favour of the proposition. Regarding the stock of asset purchases, the Committee voted unanimously in favour of the proposition.
GBP/USD jumped from $1.5420 to $1.5490. Minor resistance comes at $1.5520 (yesterday’s highs), then - at Friday’s highs at $1.5570 region.
Below losses may widen to $1.5400/90 (recent lows) and $1.5300.
YEN:
The yen declined amid reports the Japanese government is weighing a corporate-tax cut.
USD/JPY holds above Y98.00, but below session highs on Y98.20 (initial resistance). Strong resistance comes at Y99.30 (channel line from Jul 7). Initial support comes at Y97.00 with a break lower widens losses to Y95.80 (Aug 8 lows). Below support comes at channel line on Y95.50.
DATA AHEAD:
US Producer Price Index ( 2.4% vs 2.5%) will be published at 12:30 GMT.
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