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Bank of England minutes not expected to produce any surprises

Bank of England minutes not expected to produce any surprises

Earlier this month the Bank of England unsurprisingly kept monetary policy unchanged and this morning\'s publication of these April minutes should give some guide as to whether this particular move was unanimous, especially given that last month\'s minutes showed that both Posen and Miles favoured an extra £25bn worth of QE.

It will be of particular interest to see whether MPC dove David Miles has rowed back on his desire for more QE in light of the recent improvement in data, though it wouldn\'t be unexpected to see fellow policymaker and uberdove Adam Posen reiterate his belief that the economy needs more juice staying with his previous call for an extra £25bn of asset purchases.

Since those March minutes the economic data to date has continued to improve, notwithstanding the poor industrial and manufacturing production data, which surprised the markets earlier this month.

Yesterday\'s surprise rise in UK inflation numbers certainly make the case a lot more difficult for the doves on the committee, given the rise in particular in core prices, as well as the rises in fuel and food costs.

To reinforce the squeeze on consumer spending the release of February three month average earnings numbers are expected to slow even further, dropping from a rise of 1.4% to 1.2%.

The release of the latest UK unemployment numbers aren\'t likely to make for pleasant reading either, with expectations that claims for March will rise by 6k, while the ILO unemployment is expected to remain unchanged at 8.4% and 17 year highs.

In Europe the picture remains less than rosy despite a sharp fall in Spanish 10 year bond yields yesterday back below 6% yesterday, after a relatively successful short term debt sale, albeit at much higher yields than previously. It is tomorrow\'s 10 year auction that is likely to prove to be much more of an acid test, though given the longer term concerns about the effects the recent budget cuts will have on Spain\'s fiscal sustainability.

Italy\'s finances are also a cause for concern given Italian PM Monti\'s difficulties in trying to push through labour market reforms in the face of political as well as union opposition.
The IMF\'s prediction that Italy will miss its deficit reduction targets in 2012 and 2013 is expected to be confirmed today by Mr Monti.

The announcement yesterday by Japan, as well as Denmark, Norway and Sweden to make more money available to the IMF, to the tune of $86bn collectively, has raised expectations ahead of this week\'s IMF spring meeting that more money could well be forthcoming from other countries.

IMF chief Christine Lagarde is hoping that the US can be persuaded, as the fund\'s largest contributor, to help boost IMF resources by an extra $400bn to supplement this month\'s earlier agreement by the EU to boost their own bailout fund. This is likely to be a tough, if not impossible ask given the meagre increase in the European bailout fund announced earlier this month.

EURUSD - the single currency is currently playing out a triangular consolidation from the highs this year from the February lows at 1.2975. Upper line resistance is located at 1.3330 while support lies at 1.3035. The 55 day MA continues to act as resistance at 1.3210. To open up the lows this year at 1.2630 we need to see a concerted break below 1.2975. Only above 1.3400 targets the 200 day MA at 1.3525.

GBPUSD - trend line support from the January lows at 1.5235 continues to act as support on the downside. This support line currently sits at 1.5835, and would require a break below 1.5800 to open up the 1.5700 level again. The possibility of a golden cross 50/200 daily MA cross over could signal the possibility of a move higher, but the 1.6000 level as well as a close above the 200 week MA really needs to be sustained to reinforce that direction.

EURGBP - the single currency continues to find rallies difficult to sustain despite the marginal new lows for this year early this week at 0.8210.
While below 0.8280 the risk remains for further losses towards the 2010 lows at 0.8065. A move back above 0.8280 opens up risk for a move to 0.8330 trend line resistance from the February highs at 0.8505.

USDJPY - the weekly close remains important here with the cloud support now at the 80.70 level.
While above this level on a weekly closing basis the outlook remains constructive for the US dollar despite the low this week around the 80.30 level. A close below 80.70 argues for further losses towards 79.20.
The US dollar does need to break back beyond the 81.30 level to open a retest of the 81.90/82.00 area.

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