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Forex Flash: GBP/USD to enter new phase during latter stages of year – UBS

FXstreet.com (Barcelona) - The Bank of England's updated remit has now enshrined the two features of central bank activity in the post crisis era: flexible interpretations and monetary activism. To their credit, the UK authorities didn't attempt to signal any 'boldness' or experimentation and openly acknowledged that they were emulating the Fed in both style and substance.

Forward guidance is now being accepted as a necessary tool for the anchoring of expectations, and targeting Taylor-inputs is probably as close as the BoE can get to a soft N-GDP target without being so explicit. However, given Mark Carney (who approved the changes) was openly talking up the prospects of an outright N-GDP target before his Treasury Select Committee hearing, so some elements of the market were probably holding out for such a change.

“Although disappointed, it is still unwise to simply dismiss that simply because of BoE convergence with the Fed, policy differentials will not matter any more. On the contrary, given the BoE and Fed will be starting at very different points, and points at which the unilateral policy effect on the currency also differ, we can expect the GBP/USD in particular to begin assuming different reaction functions once the BoE begins to execute the new remit in Q3 or Q4 this year.” writes Research Analyst Gareth Berry at UBS.

Forex: EUR/USD at 1.2920 ahead of US jobless claims

The EUR/USD went as low as 1.2880 once the EMU Markit PMI preliminary data for February revealed much weaker than expected figures, along with German manufacturing below the 50.0 threshold. Eventually, the pair bounced back to the 1.2900 ground but is having quite a hard time to hold a position above 1.2920.
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Forex Flash: EUR/USD may be forming base – TD Securities

Not much has been said today about the Cyprus bailout but Eurozone PMI did the job of sending the EUR/USD lower: “The EUR was initially pressured by PMIs that showed a little more erosion at the core of the region. It’s notable however, that we haven’t seen new cycle lows and that the EUR’s recovered al-most all its earlier loses already, despite the very soft numbers —including a dip below the 50 threshold in German figures”, wrote analysts Shaun Osborne and Greg Moore, suggesting that also Cyprus uncertainties weren’t able to push the EUR below significant support, which may suggest that a lot of bad news is al-ready priced in. “From a broad perspective, that is a sign that we could be seeing a base forming here, as long as the Cyprus or Italian situations don’t unravel. With those key event risks still lingering though, it may be little too soon to get bullish”, they added, pointing to the 200-day moving average as key support. If broken, it should open up another leg toward the mid-upper 1.26 area.
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