GBP Weaker On Hints Of A Rate Cut

MPC discussed rate cut; UK QE 7-2 split; UK labor market improved; Swiss ZEW improved and Eurozone construction output recovered. Market turns to building permits; housing starts, 2^nd Bernanke's testimony and BOC policy report.

The greenback is stronger against most majors in the ongoing session after a brief consolidation throughout Asia. Choppy trading that we witnessed yesterday after Bernanke's testimony therefore continues. It seems that markets will have to wait until the next FOMC meeting on August 1^st or possibly even to the Jackson Hole symposium for more details on the possibility of an additional easing in the US.

GBPUSD declined after the MPC minutes from the July 5^th meeting showed that the MPC discussed cutting the bank rate and that the case for a cut could be reviewed. The QE voting showed a 7-2 split as members Spencer Dale and Ben Broadbent voted against additional easing. Market expected only one dissenter.

The latest labor market data from the UK were slightly better then anticipated as jobless claims declined to 6.1K in June from previous 6.9K and the claimant count rate remained steady at 4.9%. ILO unemployment rate declined in May to 8.1% from April's 8.2%. However, these figures could be skewed by extra hiring for the Olympic games. GBPUSD fell from session high 1.5662 to 1.5580 but recovered to 1.5605.

Swiss ZEW economic expectations for July showed a slight improvement to -42.5 from June's -43.4 and Eurozone construction output recovered 0.1% in May from previous -3.7%.

The NY session starts at 8:30 am ET with building permits that are expected to decline marginally in June to 0.77M from 0.78M while housing starts are seen higher at 0.74M from previous 0.71M.

FED chairman Bernanke starts his second testimony at 10:00 am and FED's Beige Book is due at 2:00 pm. The text of his speech will be the same but the market could react to the Q&A session that follows.

Canadian reports include BOC monetary policy report at 10:30 am followed by BOC press conference at 11:15 am.