The recovery in yield appetite continued Tuesday, and the subsequent effects on the energy markets were pronounced. Feeding off the improvement in sentiment across other capital markets, crude oil easily cleared recent resistance around $75 in the biggest single-day rally for the commodity since November 16th. From a speculative perspective, this reversal was properly timed and finding

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A dovish BoE could lead to a break of the current range setting the pair on a new course and negating the positions put forth. Waiting until the release will minimize risks and considering the significance of the event risk we will most likely see muted price action leading up to the announcement.

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The Bank of England is widely expected to maintain the benchmark interest rate at 0.50% this month, while market participants speculate the central bank to conclude its easing cycle as the economy emerges from its worst recession since the post-war period.

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The upcoming BoE rate decision has brought U.K. interest rates back into focus as the central bank has been the laggard in signaling an end to its quantitative easing efforts. The MPC has exhausted the 200 billion pounds that have been approved for its asset purchase program which has markets expecting that at Thursday’s policy meeting Governor King will announce a pause or an end to their efforts. Interest rate expectations have had little influence on GBP/USD price action with a 12% correlation as the central bank is expected to remain on hold throughout the majority of 2010. Risk trends continue to be the main driver of the pair’s volatility despite its recent divergence, as it still explains 37% of overall direction.

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US equity markets opened essentially flat with yesterday’s close and have gained in the wake of the somewhat positive housing data. The NAR commented on the data, noting that swings in contract activity are essentially masking the broad improvement ……
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Sterling has seen its losses slow as improving manufacturing and construction data have raised the outlook for future growth. Disappointing mortgage approvals have raised concerns that the BoE will keep alive their quantitative easing efforts which market…
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SP 500 Futures: The sigma channels have widened substantially over the last 2 weeks as the sell off gained momentum. However yesterday#8217;s price action opens for a bounce as it bounced of the trend line from the October and November 2010 lows ……
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The Japanese Yen bounced back against the greenback and is the best performing currency on Tuesday, while the Australian dollar tumbled lower during the overnight trade as the Reserve Bank of Australia unexpectedly held the benchmark interest rate at 3.75%.

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