The pound remained relatively flat during the overnight trade before Bank of England officials gather tomorrow on regular monthly meeting. Market participants will pay close attention on the quantitative easing decision, especially after British Chamber of Commerce said that additional BoE stimulus may not be enough to revive anemic economic growth in UK. Separately, Fitch Ratings announced yesterday that they will review the UK credit rating in the first half of the year, but said that they do not plan to change the rating at this point in time. Looking ahead to today, ONS (Office for National Statistics) will release trade data for November, with the expectations for the visible trade balance to have widened to 8.4 billion pounds, due to the unexpected jump in trade balance seen in October.
The euro regained some of its value against the dollar and the yen after a report showed German gross domestic product rose 3% last year. The single currency found support after Federal Statistics gauge said Germany’s economy expanded 3% in 2011, after a 3.7% advance in 2010, matching the economist estimates for Europe’s largest economy. However, the German economy probably contracted in the final quarter of 2011 as sovereign debt crisis hampered the country’s exports. The first reports are saying that German economy shrank by -0.25% in fourth quarter. Expect for the single currency to remain supported only for the short period of time as debt crisis in the Eurozone is expected to spoil the trend for the currency.
The dollar consolidated within its recent ranges during the Asian session as world stocks go up and as confidence in US economy grows, damping demand for dollar’s safe haven appeal. Also supporting the global stocks rally was the speculation that China will tweak its monetary policy in near future in order to encourage growth. Looking ahead to today, Fed’s Beige book and MBA Mortgage Applications headline the economic calendar in US hours.
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