Euro Edges Higher, SNB Expected to Leave Interest Rates Unchanged (page 2 of 2)

UK retail sales may not help the British Pound breakout of its range

For the past few weeks the British pound has been trading in a range against both the Euro and US dollar.

This is primarily due to the fact that the market hasn't quite figured out what the Bank of England will do next and when.

Earlier this week, the letter written by BoE Governor King to Chancellor Darling was surprisingly dovish and provided little information on how they plan on tackling rising inflationary pressures.

The release of the minutes from the most recent monetary policy also did not help. According to the BoE minutes, eight out of the nine members voted to keep interest rates unchanged while the one dissenter, who is the perennial dove (David Blanchflower) voted for a rate cut.

The monetary policy committee discussed everything under the sun including a rate hike and a rate cut. They haven't decided what to do with interest rates and as a result, the market doesn't know what to do with the British pound.

Retail sales are due for release tomorrow and unfortunately a strong or weak report may not help make up the central bank's mind. The rise in the BRC retail sales report suggests that consumer spending will be strong.

Australian, New Zealand and Canadian Dollars extend gains

The Australian, New Zealand and Canadian dollars extended their gains on the combination of dollar weakness and higher commodity prices.

Australia also reported better than expected leading indicators and a 7% rise in balance of payments.

Leading indicators in Canada were right in line with expectations but tomorrow's consumer price report could be hot. At the last monetary policy meeting, the Bank of Canada was expected to cut interest rates, but instead, they left rates unchanged which was quite a surprise for market watchers.

The BoC cited inflation and because of that, there is good reason to believe that consumer prices have continued to trend higher.

Yen crosses unfazed by drop in the Dow

The Dow Jones Industrial Average fell to the lowest level in three months but USD/JPY was the only Yen pair to be affected.

Interestingly enough, it still held up fairly well while all of the other Japanese Yen crosses edged higher.

The Bank of Japan released the minutes from their latest monetary policy meeting last night and according to the minutes, the Japanese are keeping a close eye on inflationary pressures and economic growth.

It remains to be seen whether the Bank of Japan will raise interest rates before the end of the year. This evening, the all industry activity index is due for release and the number should shed more light on state of the economy.