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Forex Flash: GBP to weaken further – Rabobank

The sterling would face renewed pressure this week, as the BoE MPC would hold its monthly gathering. Although market consensus expects the lending benchmark and the Gilts purchases to remain unchanged at 0.5% and £375 billion, respectively, the speech by the next BoE Governor M.Carney would grab all the attention, as he favours moving to a nominal GDP target in order to spark the recovery in the UK economy.

“Whether the Bank does go down this route under the leadership of Carney depends to a large extent on the performance of the domestic economy over the next 12 mths or so”, expressed Jane Foley, Senior FX Strategist at Rabobank.

According to Foley, the renewed confidence in the euro zone plus increasing inflows into the single currency have been the main deterrents to further GBP strength. “Although pullbacks are likely along the way, we expect that EUR/GBP will end the year back in the 0.88 – 0.89 area, where some congestion is likely… We expect cable to push towards the 1.55 area on a 6 mth view”.

Forex Flash: Central banks constitute major focus this week – Deutsche Bank

A major focus for the week will be on the ECB, BoE (Thursday) and RBA (Tuesday) meetings this week. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The market is not expecting a change in policy from the ECB and BoE, although Draghi's post-ECB press conference will be closely watched in light of last week's softer bank lending survey.”
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Forex: EUR/USD extends drop after US data

The EUR/USD is now reacting to the disappointing release of US factory orders. Not only it came in at 1.8% (consensus of 2.2%) in December, but November data was revised lower, from 0.0% to -0.3%. The EUR/USD is weakening further, having threatening an extended drop below 1.3550.
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