UK rate decision; Fed Yellen speaks

The US ISM non-manufacturing business activity index was better than expected but the prices index was lowest reading since April. Upon this release, USD/CHF was unable to break much above the 1.2400, even though it broke above the daily triangle. This led the a false breakout of EUR/USD. Later, the Fed’s latest Beige Book noted slower growth, with more nation-wide housing weakness. Moreover, crude oil ended below $69 which should lead to lower gas prices and less energy-based inflation risk. In the 45 mins after the release of the Beige Book, USD/CHF fell by around 40 pips in 45 mins, and continued to edge lower this morning. Both EUR/USD and USD/CHF ended virtually unchanged yesterday, while USD/JPY rose, as the Bank of Japan starts its policy meeting today to decide on the fate of Japan interest rates. USD ..

looks very weak at the moment against EUR and CHF. Next near-term resistance for EUR/USD is around 1.2855, and support around 1.2800.

Meanwhile, the Bank of Canada left interest rates steady at 4.25% as expected, and issued a statement saying that the rate is ‘judged at this time to be consistent with achieving the inflation target over the medium term’, which is identical to the Jul 11 statement.

This morning’s key jobs report from Australia came in much stronger than expected with growth at 23.4K versus consensus of 10K gain. Job growth in Australia has been rising for seven straight months, and this no doubt will be closely monitored by the RBA. The market looks to the possibility of another rate hike in Australia by end of this year. The strength of the Australian dollar may underpin NZD/JPY’s topside around 76.00.

The Bank of England’s Monetary Policy Committee is unanimously expected to keep its main interest rate on hold at 4.75% when it gathers for its monthly meeting today at 1100 GMT. Fed’s Yellen will speak on economic outlook in Idaho at 1840 GMT today, and ears should be alert to what she will or will not say.

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