The mild strengthening of the GBP, despite increasingly poor UK housing market data, could be a result of speculators going long ahead of today's rate decision, but with little prospect of a rate hike, this seems an unlikely scenario.
The Euro likewise seems to have defied market indicators to post strong results against the USD; this morning it has already touched a high of 1.576. This is despite a combination of German exports being down, French trade deficit increasing, and a general downturn in Euro Zone GDP. It seems that analysts have instead taken direction from comments by the ECB's Mario Draghi, who, in a surprisingly hawkish manner for an Italian economist, said that Trichet's rate hike last week was a ‘timely' move which was having ‘desired results'. This could well have boosted investor confidence in the Euro, sending it up against its rivals.
Across the Atlantic , the US Dollar has failed to capitalise on the weaknesses of its rivals, with a major Wall Street sell-off earlier this week preventing any noteworthy recovery. Investors could take direction later today from speeches made by Fed Chief Ben Bernanke as well as Treasury Secretary Henry Paulson; Janet Yellen will also be speaking later on in the day, so there will no doubt be plenty of material for analysts to examine.
Looking ahead, today's major market mover is clearly going to be the BoE's interest rate decision. The general consensus seems to be that Mervyn King will stand his ground and leave rates unchanged, although unlike last week's rate decision by Euro counterpart Trichet, this one has not been priced into the market in advance. What this means is whereas last week's decision left the Euro largely unchanged, any move up or down for the Sterling could see some major fluctuation today.