By FX Empire.com
The pair showed decline on Wednesday trading as fears spreading in markets on uncertainty in the euro area and lack luster U.K. data damped demand on high-yielding and risky assets.
Still, the main focus is on the latest developments from the euro zone debt-laden economies, where the main concentration meanwhile is on the imminent political change in Greece and Italy.
Prime Minister Silvio Berlusconi offered to step down after the approval of the austerity measures needed to cut the euro area’s second-largest budget shortfall, where he failed to gain strong majority in the budget vote as some of his allies supported opposition which put the voting on the austerity measures at risk.
Italian bond yield rose to record high and Credit Default Swaps climbed also, noting that the baled-out Ireland is having a similar rise in bond yields.
On the other hand, Greek Prime Minister George Papandreou agreed to step down to make a national unity government to continue the progress with the EU and IMF.
Greek Prime Minister George Papandreou agreed to step down to make a national unity government that has to accept the EU/IMF aid program to receive the next tranche of last year’s bailout this month to avoid default.
Moreover, data from the U.K. added to worries as it showed that goods trade deficit widened to 9814 million pounds in Sep. from the revised 8617 million pounds in August.
The Confederation of British Industry (CBI) lowered growth projections for the U.K. to 0.9% and 1.2% this year and next from the prior forecasts of 1.3% and 2.2%, where it also cut growth forecasts for the euro area and global economies.
Accordingly, the pair was dragged down as investors resorted to the dollar as a safe haven.
On Thursday, the main focus will be in the main highlight of highlight of the week which the BoE rate decision for Nov. 10. At 12:00 GMT, the BoE will hold both borrowing cost and APF quantity on hold at 0.50% and 275 billion pounds, according to median forecasts.
As of 13:30 GMT, the U.S economy will release trade balance which is expected to show a widened deficit of $46.0 billion in Sep. from $45.6 billion deficit a month earlier. At the same time, initial jobless claims for the week ended Nov. 4 and continuing claims for the week ended Oct. 28 will be available. At 19:00 GMT, the monthly budget statement for Oct. is predicted to show a deficit of $110.5 billions.
The data is predicted to have significant impact on the pair, yet the main focus will remain on the latest developments from Greece and Italy.
Originally posted here
