GBP/USD dropped more than a cent during the US morning as disappointed bulls pulled the plug on longs after the BOE left rates unchanged. Prices slipped from 1.8860/65 before the BOE held the line, dropping to 1.8750 in the hours that followed. Modestly improved US economic data helped bolster the USD as well. Jobless claims fell sharply the day before the key September employment report and chain stores reported strong sales for the month as well, showing the consumer is not dead yet. US yields regained the ground lost yesterday amid jitters over a housing-led slowdown following Bernanke.
More than anything else, dealers hope for a surprise tomorrow. A number close to expectations will keep the market in its interminable ranges and dealers are desperate to see some new ground. The pound suffered a bit on the crosses today, especially against the JPY, as Trichet reminded the market that the ECB would like it to reflect fundamentals like rising interest rates and rebounding economic growth. UK Industrial production is set for release on Friday; a 0.1% m/m rise is expected.
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