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Forex Flash: UK inflation data in focus today – BTMU

Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the main economic data release in Europe today will be the UK inflation report for January which is expected to reveal that inflation picked up modestly extending its period above the BoE’s 2.0% inflation target to 38 months.

He comments that in an unusual move last week, the BoE released a policy statement following no change in policy reiterating that the MPC continues to look through the current above target levels of inflation seeing much of the elevated level as due to administered and regulated prices rather than underlying domestic inflation pressures.

He writes, “Interestingly, the statement also acknowledged that inflation “may remain above their 2.0% target for the next two years” which implies that tomorrow’s release of the BoE’s latest quarterly inflation report may include notable upward revisions to inflation projections for 2014. Still the BoE is likely to reiterate again that it remains comfortable to tolerate the inflation overshoot to support growth which is seen as negative for the pound while growth remains weak.”

Forex Flash: FX overnight developments, JPY and EUR in focus – UBS

The USD/JPY broke to even higher ground overnight after Lael Brainard – US Undersecretary of the Treasury said the United States supports Japan's efforts to reinvigorate growth and beat deflation. Investors took the remarks as a green light for Japan's Prime Minister Abe to press ahead with his economic plans, despite the yen weakness these are inducing.
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Gold prices trading at $1644.37

After breaking the short-term support during European trading, gold prices continued to move lower, dipping below the 1645.00 level Tuesday. According to the Technical Analyst Team at ICN.com, “The bearish bias is expected to continue, eying a retest of the major low at 1625.00 level, however, rallies should remain limited below 1653.00-1655.00 level for this bearish bias to remain dominant.”
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