The pound remained flat against its major rivals after Bank of England increased its asset purchase program at yesterdays meeting. The Monetary Policy Committee (MPC) raised the target for bond purchases by 50 billion pounds to 325 billion, and left the base interest rate unchanged at 0.5%. Market participants supported the central bank’s decision as UK economy needs an accommodative monetary policy in order to spur economic growth. Yesterday’s economic data also showed that UK manufacturing advanced in December and the total trade deficit shrank to the smallest level since 2003. The latest reports are pointing to an improving economic activity at the end of a fourth quarter when the economy shrank by 0.2%. Looking ahead to today, producer price data for January headline the economic calendar, with expectations for the input prices to have improved by 0.2% from –0.6% in previous month. Output prices are expected to have increased by 0.1% on monthly bases while core output prices are expected to remain flat.
The euro consolidated yesterday as European finance ministers withheld a bailout package for Greece. Greek Finance Minister Evangelos Venizelos said his euro-area counterparts refused to approve a 130 billion euro aid package because the government fell short of austerity demands. Greek lawmakers will vote on measures to cut spending this weekend in a ballot that will probably decide the country’s membership in the currency union. On the economic docket, German consumer price index (CPI) report and French manufacturing production release are all due out today.
The dollar gained across the board during the Asian session as investors run for safety of the world’s reserve currency. European stocks fell and Asian shares also retreated during overnight session as European debt crisis continue to create risk aversion in the markets. Looking ahead to today, trade balance figures, consumer confidence report and monthly budget statement headline the economic calendar. Expect for the greenback to remain in current ranges ahead of the economic releases scheduled for today.
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