Forex Analysis: British Pound Sinks as Carney Hints at More Easing

The British Pound fell following comments from soon-to-be Bank of England Governor Mark Carney suggesting he will pursue further monetary easing.

Talking Points

• British Pound Sinks as Carney Hints at Further Easing Ahead

• US Durable Goods Orders Data May Disappoint Expectations

• Caterpillar Q4 Report Headlines Corporate Earnings Docket

The British Pound broadly underperformed in overnight trade, down against its top counterparts. The selloff followed comments from incoming Bank of England Governor Mark Carney, who is due to replace the current BOE chief Mervyn King in July. Carney said central banks have not “maxed out” the possibilities for further stimulus and may do more, stressing the need to achieve “escape velocity” as developed economies struggle to pick up pace in the aftermath of the Great Recession. The remarks hinted that Carney will pursue further accommodation when he takes the reins at Threadneedle Street.

A quiet economic calendar in European hours is likely to see forex traders looking ahead to the US data docket for directional guidance. December’s Durable Goods Orders report is in focus, with economists forecasting a 2 percent month-on-month increase, yielding the largest increase in three months. US releases have increasingly fallen short of expectations since late December (according to data from Citigroup) however, warning of a vulnerability to downside surprises as the markets’ outlook is adjusted lower. Pending Home Sales and the Dallas Fed’s Manufacturing Activity Survey are also on tap, with softer outcomes penciled in for both.

On the corporate earnings front, cycle-sensitive Caterpillar Inc is due to report fourth-quarter results. Expectations suggest sales fell 2.3 percent compared with the third quarter while earnings declined from $2.260 to $1.703 per share. Traders are likely to be most concerned with the company’s guidance however as they continue to build the outlook for global growth against a backdrop of lingering uncertainty on the US fiscal policy front. Indeed, while forecasts from the IMF, the World Bank and private-sector economists (as polled by Bloomberg) argue for a modest pickup in 2013, a large dose of austerity from Washington DC may meaningfully change the landscape.

Asia Session:

GMT	CCY	EVENT	ACT	EXP	PREV
1:30	CNY	Industrial Profits YTD (YoY) (DEC)	5.3%	-	3.0%
21:30	NZD	Performance Services Index (DEC)	51.5	-	54.2
23:50	JPY	Corporate Service Price (YoY) (DEC)	-0.4%	-0.5%	-0.5%
0:01	GBP	Hometrack Housing Survey (MoM) (JAN)	0.0%	-	-0.1%
0:01	GBP	Hometrack Housing Survey (YoY) (JAN)	-0.3%	-	-0.3%

Euro Session:

GMT	CCY	EVENT	EXP	PREV	IMPACT
9:00	EUR	Euro-Zone M3 s.a. (YoY) (DEC)	3.9%	3.8%	Low
9:00	EUR	Euro-Zone M3 s.a. (3M) (DEC)	3.8%	3.4%	Low
9:00	EUR	Italian Consumer Confidence Index sa (JAN)	86.0	85.7	Low
10:00	EUR	Italian Hourly Wages (MoM) (DEC)	-	0.1%	Low
10:00	EUR	Italian Hourly Wages (MoM) (DEC)	-	1.6%	Low

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.3383	1.3512
GBPUSD	1.5629	1.5835

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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