Archived IMT (2011.03.23)

Portugal vs BoE? Euro vs BoE? Either way you look at it, these fundamental dynamics are increasingly expressed in the recent decline of EURGBP. Tuesday's release of unexpectedly high UK CPI kept GBP bulls happy and Wednesday's BoE minutes should once again likely show the same number of hawkish dissenters, paving the way for an April rate hike. ON THE EURO SIDE of the coin, the vote on Portugal's austerity package is also due on Wednesday. The main opposition party (centre right) will not back the measures, which could lead to the resignation of prime minister Jose Scrates. This could be a problem for the EU leaders meeting on Thursday to finalize the terms of the EFSF and the ESM. Could the euro ignore the downfall of the Portuguese govt and remain boosted by interest rate hopes? And if playing EURUSD shorts is unwise, then my bearish EURGBP call remains intact (after failing the all important 0.8770 and the 100-week MA) and now is at 100 pips lower). The Feb 18 trendline is under assault and will need a daily close below 0.8635-40 to pave the way for 0.8590s.