Forex Today
There the battle line was drawn and there the market voted-the data was interpeted as being dollar positive, likely to push back expectations of a rate cut and the dollar rose pretty much across the board. You could say that with the dollar being in such a weak, oversold position-any good news was bound to make the dollar shorts nervous and so a round of dollar buying proceeded.
It's possible the Japanese Finance Minister contributed to some GBP/JPY and EUR/JPY unwinding as he made a statement regarding interest rates-saying they would be adjusted to make carry trades less attractive. This helped contibute to GBP/USD and EUR/USD selling (which is what happens when carry trades unwind) as some carries were closed. We'll have a better idea as to how realistic the statement really is later with the release of JPN GDP and the BoJ's rate decision.
The BoE Inflation report had traders increasing bets on another rate increase, but this is by no means certain. The Bank is projecting CPI to return to "about" target (2%) by the end of 2007, with the risks tilted to the upside. The Bank will be closely monitoring the usual suspects: energy, consumer consumption, GDP, spare capcity, wages and inflation expectaions.
What we're really left with is a likely continuation of the housing correction that the market is perceiving will not put the economy into recession. The ISM, NY Fed and IP indicate manufacturing is picking up and could support the economy as housing continues to drift down.
The debate over how much of an effect increased gas prices will have on consumer spending will go on. The headline CPI indicated that so far, higher gas prices are not "passing-thru" to core components. Home values are down, as are mortgage applications; real wages are stagnent but the jobs are there.
Watch this video from CNBC to hear a debate on this:
http://www.cnbc.com/id/15840232?video=298088797&play=1