London Session

The euro has pushed higher vs. the majors in the European morning. Despite meeting with resistance around USD1.3340, the EUR should find additional support by the much better than expected 3.3% m/m rise in Mar German factory orders. The market, while focused on the policy announcements from both the ECB and the BOE today, is expecting no surprises from the BoE and is forecasting that divisions within the ECB's board will prevent it from following the road to quantitative easing, at least for now. A 25 bp cut in the refi rate is considered to be a done deal and an extension in the term of funding provided in refi operations from 6 mths up to 12 mths is also considered a likely prospect. The BoE is expected to announce steady rates and to confirm it is continuing its policy of buying GBP75 bln of assets, around two-thirds of which has already been done. Speculation that the BoE may increase this target to around GBP100 bln (still within the GBP150 bln that has been authorised by the government), is being dampened by recent economic data suggesting that the downturn may be bottoming.

The EUR has not fared well again the CE3. The plunge in EUR/PLN, EUR/HUF and EUR/CZK follows a report in the FT highlighting a mistake in recent IMF data with respect to the size of the debts in some Eastern European countries. Buying interest in the CE3 massages the idea that risk appetite may be returning given the improvement in economic data in recent weeks. This idea found significant support in Asian hours on the back of far better than expected Australia employment data.
Counter to market expectations, Australia actually added jobs in April. In total, employment increased by 27.3K. Perhaps most startling was that full time jobs increased by 49.1K. In New Zealand, the unemployment rate fell back to 5.0% in Q1 well below the median expectations of 5.3%. AUD/USD is edging towards the 0.7600 resistance level, the NZD has run into some resistance in the NZD/USD0.5940 area.

EUR/GBP has had a choppy morning, lacking clear direction. Cable has been dragged higher following the stronger EUR/USD. Resistance lies ahead in the GBP/USD1.5220/40 area.

While the US govt is still due to release its press report on the outcome of the bank's stress test later today, the market's reactions to yesterday's leaks combined with comments from Treasury Secretary Giethner that the results of the stress tests would be ''reassuring'' suggests that this will no longer have a significant market impact.

Upcoming Economic Data Releases (US Session). Prior, Expected