Ilya Spivak, Currency Analyst at DailyFX, comments:
“UK event risk headlines the docket in European hours today with minutes from this month’s Bank of England policy meeting and January’s Jobless Claims data on tap. Traders will look to the former release to help further illuminate the discussion about the evolution of the MPC’s forward-guidance regime. The latter report is expected to show applications for unemployment benefits fell 20k from the prior month.
“On balance, British Pound volatility borne of rhetorical nuances in the MPC’s discussion or pronounced deviation from consensus forecasts on the jobs data is unlikely to generate follow-through. The lion’s share of the current landscape was already established with last week’s Quarterly Inflation report, leaving relatively little room for near-term shakeup of the status quo.
“Later in the day, the spotlight turns to minutes from January’s FOMC sit-down. The report may mark the beginning of a recovery for the US Dollar, which has been heavily sold over recent weeks in a move that seemed to reflect the unwinding of EM-driven risk aversion. A relatively hawkish tone from Fed officials that reaffirms a commitment to “tapering” QE despite recently disappointing US economic news flow may offer the benchmark currency renewed vigour.”