Forex Flash: Central banks in focus later today – UBS

Overnight, the euro continued to benefit from a consensus-beating ZEW report out of Germany yesterday. According to Research Analyst Gareth Berry at UBS, “Our economists note a strong correlation between this and manufacturing PMI (due Thursday), which offers scope for further euro upside.” Moreover, the Bank of England and FOMC minutes due out today will have an important bearing on our existing short Cable trade recommendation.

“Greater tolerance of above-target UK inflation would likely hurt the sterling – especially if combined with a reluctance to embark on more QE. This combination would after all reduce the incentives for foreigners to hold Gilts, at a time when the AAA rating may arguably be at risk too.” Berry adds.