FOREX: Pound Vulenerable as Bank of England Releases Meeting Minutes

The British Pound may decline if minutes from May's Bank of England rate decision reveal another 6-3 vote as a prominent hawk leaves the rate-setting committee.

Overnight Headlines

• US Dollar Sold as Asian Stocks Rebound After Four-Day Selloff
• New Zealand Dollar Outperforms on PPI, Consumer Confidence

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.4168	1.4334
GBPUSD	1.6206	1.6316

The Euro and the British Pound advanced in overnight trade, adding as much as 0.4 and 0.2 percent respectively against the US Dollar, as the greenback came under broad-based selling pressure amid a recovery in risk appetite (see below).

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Producer Prices - Inputs (QoQ) (1Q)	2.2%	-	0.9%
22:45	NZD	Producer Prices - Outputs (QoQ) (1Q)	1.7%	-	0.2%
23:50	JPY	Tertiary Industry Index (MoM) (MAR)	-6.0%	-5.8%	1.0%
0:30	AUD	Westpac Consumer Confidence (MAY)	-1.3%	-	1.2%
0:30	AUD	Westpac Consumer Confidence Index (MAY)	103.9	-	105.3
1:00	NZD	ANZ Consumer Confidence (MAY)	1.9%	-	0.0%
1:00	NZD	ANZ Consumer Confidence Index (MAY)	103.3	-	101.4
1:00	AUD	DEWR Skilled Vacancies (MoM) (MAY)	-0.4%	-	1.7%
1:30	AUD	Wage Cost Index (QoQ) (1Q)	0.8%	1.1%	1.0%
1:30	AUD	Wage Cost Index (YoY) (1Q)	3.8%	4.0%	3.9%
4:00	JPY	Tokyo Condominium Sales (YoY) (APR)	-27.3%	-	0.0%

The US Dollar underperformed in overnight trade, down as much as 0.3 percent on average against its top counterparts as stocks rose across Asian bourses, sapping demand for the safety-linked currency. The MSCI Asia Pacific regional equity index rose 0.9 percent, with newswires chalking up the advance to speculation about increased M&A activity.

This logic seems somewhat thin however. On balance, the bounce is likely owing to little more than a corrective retracement after shares suffered heavy losses over the past four days, with the larger bearish theme centered around the unwinding of bets dependent on cheap QE2 funding ahead of the program's June expiry running into short-term bargain hunters.

The New Zealand Dollar outperformed, with supportive risk sentiment trends compounded by supportive economic data. The Producer Price Index added 1.7 percent in the first quarter, marking the largest increase in a year, while the ANZ gauge of Consumer Confidence added 1.9 percent in May, yielding the first increase since January.

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
8:30	GBP	Jobless Claims Change (APR)	0.0K	0.7K	Medium
8:30	GBP	Claimant Count Rate (APR)	4.5%	4.5%	Medium
8:30	GBP	ILO Unemployment Rate (3M) (MAR)	7.8%	7.8%	Low
8:30	GBP	Bank of England Meeting Minutes	-	-	High
8:30	GBP	Average Weekly Earnings inc Bonus (3MoY) (MAR)	2.0%	2.0%	Low
8:30	GBP	Average Weekly Earnings ex Bonus (3MoY) (MAR)	2.2%	2.2%	Low
9:00	EUR	Euro-Zone Construction Output w.d.a. (YoY) (MAR)	-	3.5%	Low
9:00	EUR	Euro-Zone Construction Output s.a. (MoM) (MAR)	-	-0.7%	Low

The publication of minutes from this month's Bank of England policy meeting headlines the calendar. The release has become the headline announcement for UK monetary policy considering the central bank has kept interest rates on hold for over two years while shying away from releasing an explanatory statement at the time of its policy announcements.

Most critically, traders will be keen monitor the voting pattern on the rate-setting MPC; the committee voted 6-3 to keep rates on hold in April, and the markets will want to see if the hawks managed to expand their ranks. Another 6-3 outcome may prove to weigh on the British Pound considering rate hike advocates will lose their most ardent representative – Andrew Sentence – who will be replaced by Goldman Sachs economist Ben Broadbent, a moderate that could swing in either direction in future meetings, at the end of the month.

Separately, UK Jobless Claims are expected to hold flat in April following a modest 0.7K increase in the previous month. The Claimant Count – a proxy for the jobless rate – is forecast to remain unchanged at 4.5%. While the labor market has been on an improving trajectory since claims topped out in October 2009, the pace has slowed dramatically over the past year. Indeed, applications for jobless benefits have declined at annualized rate of just 1.7 percent since June 2010, as compared to 14.2 percent over the preceding 8 months. On balance, a flat result this time around does little to change this reality, amounting to at best a non-event.

Related: UK Jobless Claims LIVE

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