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GBPJPY<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Carry trade notions were alive and well on the day, as traders bid the GBPJPY cross pair higher in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />New York.  Following an unexpected rate hike by the Bank of England, traders took to the now even higher yielding currency, still exploiting a widen interest rate differential.  For the record, the Monetary Policy Committee increased rates 25 basis points to 4.75 percent.  The decision now widens the gap back to where we started at the beginning of the year by 450 basis points, even as the Bank of Japan increased rates by 25 basis points this past month.  Further bidding should retain the days momentum as we head into the Asian session as profit taking is sure to keep the pair consolidating in the near term.  Should the 217 support figure hold, the next test of upside resistance looks to be in the form of the 217.50 level.  Downside risk, however, does still remain with a break of the current floor.  Subsequently, a pullback to 215.50 is possible on major / cross shorting ahead of the U.S. non farm payroll figure tomorrow.

Offers remain ahead of the current spot price with layers of sellers above 217.50.  The setting should keep the cross range bound for much of the Asian session with downside protection coming in with pullback bids on the 217 and slightly lower.  Stops are likely to be triggered to the downside should current floors fail to hold.

GBPUSD

The Pound major was well supported on the session following an unexpected decision to raise rates by 25 basis points by the Monetary Policy Committee.  The first such decision in almost 2 years, the rate hike arises amidst the fastest pace of growth in as much time as crude oil costs push inflationary prices higher. Coupled with renewed consumer demand and a strong housing market, the UK economy looks set for another advance.  As a result, the notion has purported Governor Mervyn King and company to remain steadfast in their attempts to curb inflationary conditions by hiking central bank rates.  

According to the latest consumer price index survey, increases are moving at a 2.5 percent annualized pace, well above the 2 percent benchmark set by the governing body.  The party may be short lived, however, as tomorrows US employment report may very well short circuit the current runup.  Expected to be released at a 150,000 position addition, the report may suggest further need for rate hikes by the Federal Reserve.  Futures traders arent betting on such an occurrence as contracts are now pricing in a 38 percent probability of such a situation.  Should the worlds largest economy add as many workers, however, the pound sterling could be in for a long day.

GBPCHF

Rounding out the top three market movers, the GBPCHF cross pair increased by 0.6 percent, climbing by 222 basis points on the session.  As in GBPJPY, the cross pair price action was fueled by major demand on the sterling major as rate differentials once again played a hand in the demand.  Although not as wide as the GBPJPY cross, the pair still offers a 325 basis point gain should one invest in the pound leg of things.  With little to no data tomorrow activity is likely to be centered around major currency pair trading, anything with a dollar component as the Federal Reserve decision next week remains somewhat dependant on tomorrows report. 

Should employment remain strong, speculation is siding with one final hoorah and additionally hawkish commentary.  However, should the report fail consensus figures, bears are likely to pounce giving the pound a leg up on the session.  Expectations are beginning to mount of further rate hike potential in the UK towards yearend as the Fed halts tightening campaigns.