Source: ForexYard
An early morning rebound in both the EUR and Italian bonds were short lived while the BoE preps for additional quantitative easing with its latest inflation report.
The ECB through its SMP program was out in full force buying Spanish and Italian bonds. There were reports circling of the ECB buying up to EUR 1 bn in Italian bonds alone. Despite the ECBs best efforts the Italian 10-year bond yield was up above the 7% level. The Greek 2-year sank to a new low with yields climbing to 115.50%. The spread between the 10-year French German yield was also at an EMU high of 195 bp. European equities are also lower with the German DAX down close to 1%.
Early in the European trading session the EUR/USD looked to put in a low of 1.3425 at a technical support level, climbing to a high of 1.3555 before quickly being pushed lower to 1.3470. There is lots of market chatter of traders targeting the 1.3145 October low. Yesterday the EUR/JPY made a decisive close below the 104.70 support line. There is a lack of support on the daily chart until the 100.75 low from early October.
The BoE is prepping for additional quantitative easing as the UK central bank said it sees the risk for price pressures to the downside and growth will be slower than expected. This may be the first step the BoE is taking on a path to additional bond buying above the GBP 275 bn which it has already bought. Additional bond buying is likely a negative for Sterling. The GBP/USD has support at the October 18th low of 1.5630.
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