Watch for Surprises from the Bank of England (page 2 of 2)

Euro: Shrugs off weak data

Despite weaker economic data and moderate comments from ECB President Trichet, the Euro strengthened against the US dollar.

First quarter GDP was revised down from 0.8% to 0.7%; the annualized pace of growth remained unchanged at 2.2%.

To put this number into perspective, the annualized pace of growth in the US during the first quarter was only 1.0%.

The German trade deficit also fell significantly due to a 3.2% drop in exports.

Spain could fall into a recession in the second half of the year, while Irish banks are warning about their own recession.

Not only will this drag down overall Eurozone growth, but it could also spillover into Germany and France. For these reasons, the European Central Bank refuses to commit to any monetary policy bias. This morning, ECB President Trichet defended their stance by saying that last week's hike was meant as a signal.

Canadian and New Zealand Dollars skyrocket, Aussie held back by employment numbers

The biggest story in the currency market today is undoubtedly the Canadian dollar which skyrocketed against all of the majors.

The Canadian dollar quietly gained strength going into the US trading session, but the rally took off after the housing market numbers, which were stronger than the market expected.

The New Zealand dollar also gained ground ahead of their business PMI numbers, which will be released this evening.

The Australian dollar on the other hand trailed behind as the sharp drop in consumer confidence (to 16 year lows) and the prospect of weaker employment numbers weighed on the currency.

Japanese Yen Crosses hit by 230 point plunge in the Dow

Japanese Yen crosses came under severe selling pressure on the heels of a major reversal in the Dow.

Economic data was better than expected with machine tool orders rising a whopping 10% in the month of May.

The market was only looking for a 1% rise, so the surprise was huge.

Looking ahead, Current Account and Trade Balance figures should have a significant impact on the currency, as the economy remains highly dependent on trade.

In addition, yearly Domestic CGPI figures are expected to increase on the back of high inflation. However the fate of the yen crosses will continue to largely depend upon the movements in equities. If the Nikkei follows the Dow lower tonight, we could see further weakness in USD/JPY.