EUROPEAN session review:

Data released: 

10:00 GMT Switscheland ZEW Survey - Expectations (Jan) 36.4 44.0 39.4 

12:00 GMT US MBA Mortgage Applications (Jan 17) 4.7% 11.9% 

Pound gained as Bank of England officials indicated that they may maintain interest rates at a record low even if the jobless rate falls to a key level sooner than they had previously anticipated.

U.K. unemployment, as measured by International Labour Organization methods, declined to 7.1% in the three months through November from 7.4% in the quarter through October, the Office for National Statistics said in London today. The median forecast of 33 economists was for a decline to 7.3%.

Bank of England policy makers see no need to raise interest rates soon even as they forecast that unemployment will fall to a key level far sooner than they previously anticipated.

The Monetary Policy Committee “saw no immediate need to raise bank rate even if the 7% unemployment threshold were to be reached in the near future,” it said in the minutes of its Jan. 8-9 meeting, published today. It said cost pressures remain “subdued” and headwinds to growth “would persist for some time.”

The Dollar Index snapped a six-day gain before reports this week that economists said will show the number of American first-time claimants for unemployment benefits increased and house prices dropped.

Yesterday the International Monetary Fund raised its forecast for global growth this year as expansions in the U.S. and U.K. accelerate.

EURO

The euro holds its positions versus the dollar.

EUR/USD keeps positive mood after challenging $1.3580 (initial resistance). Below $1.3500 losses may widen to $1.3400 (Nov 21 lows). Above $1.3580 resistance comes at $1.3600 and $1.3685/95. Above - at $1.3720 and $1.3820 (Dec 30 highs).

POUND

The pound rallied after a positive report from the UK labour market as the unemployment rate dropped to 7.1% in the three months ended in November, exceeding estimates at 7.3% and lower than the 7.4% previous.

BOE MPC Minutes showed that there is no immediate need to raise bank rate if jobs rate hits 7% in near future:

-9-0 votes to keep rates and QE on hold;

-likely that unemployment will hit 7% threshold ” materially earlier” than forecast in Nov;

-domestic recovery has taken hold.

GBP/USD rallied to $1.6560 after it broke above $1.6520. Now resistance comes at $1.6580 (Dec 27 highs). Minor support comes at $1.6400. Below losses may widen to $1.6220 (Dec 17 lows) and $1.6180.

YEN

The BoJ reiterated its monetary policy stance in today’s meeting, stressing at the same time that the domestic economy keeps the recovery on track, although it lowered its GDP growth forecast for 2014 to 1.4% from 2.7% in 2013. 

BOJ’s Kuroda: Risks to BOJ’s price forecast have not materialized

-if risks do not materialize then no need to change monetary policy;

-monetary policy aimed at achieving domestic price stability, not forex level;

-expects Japan to see 2% inflation around ende of fiscal year 2014 through fiscal year 2015;

-economic recovery is becoming more clear in US and Europe.

USD/JPY consolidates between Y104.00/50. Minor resistance is around Y104.90/00 (Jan 16 highs). Initial support comes at Y103.85 (recent lows). Below losses may extend to Y103.00 and Y102.20 (Dec 11 lows).

DATA AHEAD:

At 15:00 GMT BoC announces Interest Rate Decision.

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