Forex News and Events:

When the smoke cleared, not much really happened at yesterday's much hyped Central Bank announcement. In fact, we would venture to say that the day's only real fireworks occurred when rumors spread of the resignation of PM Gordon Brown and/or Alistair Darling. The GBPUSD fell from 1.6400 to 1.6090 on the false news. The once untouchable Sterling has now taken on a decidedly bearish tone. Yesterday's aggressive selling highlights the nervousness surrounding the currency. Analysis’ had spun clever tails to rationalize the cables strength, after the S&P downgraded the counties outlook , but in reality perhaps the GBP should be punished along side the USD for fiscal and monetary irresponsibility (just ask Merkel). The EURUSD traded virtually on 1.4200 all night, there seems to be little impetus for a higher EURUSD. The head and shoulders formation we're seeing is setting us up for a reversal trend to at least 1.4050 (next crucial support) and the NFP's could bring the impetus for further dollar gains. The last 24hrs in the FX markets have been quite volatile, while other assets classes have been relatively stable, hinting to further volatility ahead for FX traders. Commodities like copper and crude are now close to or breaking yearly highs, equity markets continue to storm forward and the yield curve carries on steepening. Recapping yesterday's BoE, ECB and BoC rate announcements, all left rate unchanged. The most interesting development was Trichet's attempt to add detail to the ECB eur60bn covered bond purchase program. Perhaps sensing the markets request for an exit strategy (which Bernanke slightly touched on this week), Trichet went out of his way to stress that the ECB would develop one when the economy turned around. We are concerned that in order to appease certain EU politicians the ECB might trample the fragile recovery. Currently the rally in risky assets has stalled in front of the always important NFP release today. The market expects the smallest decline in payrolls since October at -520k vs. -535k prior reading. Interestingly the range of forecast on Bloomberg is tight which will means a surprise in either direction should have significant repercussion in the FX markets. USD trading is still counter intuitive with a US negative number positive for the USD and vise versa..