GBP Pounded by BoE by Korman Tam

The greenback was mixed in the Wednesday session, advancing versus the British pound and the yen while struggling against the euro and Aussie. With the exception of the sterling, the higher yielding currencies rallied against the yen as speculators continued to jump back into the carry trades following the sharp unwinding of recent sessions.

Economic data from the US were largely softer than expectations. The October PPI increased by 0.1% on a monthly basis, down from a 1.1% increase previously while the annualized PPI jumped to 6.1% from 4.4% previously. Core PPI was flat on a monthly basis versus 0.1% previously, but the yearly core PPI jumped to 2.5%, from 2.0%. Meanwhile, retail sales for October were weaker with the headline report inline with estimates at 0.2%, but down from the previous month at 0.6%. The excluding-autos retail sales figure missed expectations, down to 0.2% versus 0.4% a month earlier.

Bank of Canada Deputy Governor Jenkins expressed concern over the rapid appreciation in the Canadian dollar, saying the recent rise is stronger than historical experience have suggested. He said that Canada has been bearing a disproportionate share of adjustment in global imbalances. He warned that if the Loonie remains at current levels, there will be increased risks of significantly lower inflation and output.GBP Pounded By BoE

The sterling plunged 1.4% from its session highs against the dollar and 1.6% versus the yen after a report from the Bank of England not only tempered expectations for future rate hikes but raised the scope for a shift in stance toward potential rate cuts in the coming months. The BoE sees inflation reaching its 2% target in two years using market rates, which, were based on the Bank’s assumption for two 25-basis point rate cuts.

Economic data released from the UK saw the September ILO unemployment rate remain unchanged at 5.4%. The claimant count for October was -9.9k versus a prior reading of -12.8k while 3-month average earnings in September crept higher to 4.1% from 3.7%.

Cable fell by nearly three-big figures on the session relinquishing all of its previous day’s gains to 2.0550. Support is seen at 2.0520, followed by 2.05 and 2.0465. Additional floors will emerge at 2.0420, backed by 2.04 and 2.0360. On the upside, resistance is eyed at 2.06, followed by 2.0640 and 2.0685. Subsequent ceilings are seen at 2.07, backed by 2.0730 and 2.0770.