Markets took a rest on Wednesday and the forex market was little changed. The euro and Aussie dollar were being modestly higher when the U.S. dollar and Canadian dollar lagged as oil slumped.

News flow was soft. European leaders continue to try to hammer out a backstop pertaining to Ireland. The Irish government asserts it does not need or want to be bailed out therefore the money will most likely be funneled on to embattled Irish banks. Increasing confidence that something is going to get done has reinforced the euro.

In the United States, two economic data points assisted to support the Fed’s introduction of QE2. The consumer price index was flat for the third consecutive month, not including food and energy. Economists had been looking for a reading of 0.1%. The lack of price demands suggest the Fed was correct to head off a threat of deflation.

Similarly, Housing data in the United States proceeds to show no indication of a base. Housing starts dropped to an annual pace of 519K in October – the lowest since April 2009. Economists had been planning on a reading of 598K and the September data had been modified to 588K from 610K. The pipeline seems to be likewise bare with building permits rising just 0.5% in comparison to the +3.9% predicted. The market has been conditioned to anticipate absolutely no great news from the housing field so the reaction had been just about a 10 pip fall in USD/JPY.

Fed policymakers communicating over the past day have introduced the strategy of additional quantitative easing, above of the $600 billion introduced on Nov. 3. Chicago Fed President Charles Evans (non voter) said the $600 billion plan is a „good place to start“ whilst Boston Fed President Eric Rosengren (voter) said the Fed might need to consider doing more if the country’s economy weakens. The remarks are aiding risk appetite and stalling the U.S. dollar rally.

The top performer (narrowly) on Wednesday was the pound sterling. This comes after claims for jobless benefits fell 3.7K in October in comparison to the +6.0K predicted. The Bank of England’s minutes showed the same three-way split as last month with Sentance asking for rate hikes and Posen calling for more QE.

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