Forex Market Update: Euro Pares Losses From the Drop in German PPI

EUR/USD traded up to 1.3640 after aggressive Middle Eastern buying interest. Weak trailing stops were filled on the way up and more are noted at 1.3655 and 1.3670 ahead of good standing offers at 1.3700. Larger stop loss interest is noted at 1.3740-45, which is expected to see heavy interest if it come in to play, although this is likely to be dependent on risk appetite. The euro has shaken off the decline in German PPI, which was much weaker than expected at -1.4% m/m and -2.7% y/y. The focus is likely to remain on equity markets, which are little changed on the session as the market digest economic recovery prospects. Option players indicate large outstanding expiries at 1.3600, which could draw an influence if the topside holds

Bank of England Votes Unanimously to Hold Interest Rate at 0.50%, Increase Asset Purchase by GBP 50B
The BoE MPC voted unanimously in favor of raising the asset purchase target by GBP 50 bln to 125 bln at this month's monetary policy meeting, the minutes from the May meeting showed. However, as expected there was a range of views about the amount by which to increase asset purchasing. Though all members favored raising the target, as we had expected, views ranged between 50 bln and 75 bln, but those favoring a larger increase saw no pressing need for it. The MPC noted that the Asset Purchase Scheme will be revised every month and the purchase target could be raised or lowered. (So far the MPC has been given a 150 bln ceiling by the Treasury, however.) Arguments for not extending the program included uncertainty of impact, signs of economic recovery, monetary stimulus already in the pipeline and the difficulty for the MPC to judge when to withdraw. The MPC also noted that recent surveys show that economic decline is moderating but that they give little insight into the robustness of recovery. The MPC was unanimously in favor of holding the repo rate steady at 0.5%.