[ForexNews]

Today's excitement was the Bank of England's surprise extension of its asset purchase program by GBP 50 bio, twice the expected amount, and Sterling took a significant hit, down almost 2 cents in 5 minutes. This takes the total UK Quantitative Ease program to GBP 175 bio and the drop in UK yields will likely further unwind the recent EUR-GBP rally. Euro/dollar remains anchored around 1.4400 in thin summer markets, capped by (rumored, at least) barrier options at 1.4450 but supported at 1.4350. German June factory orders were a pleasant surprise, overall orders +4.5% m/m to their least depressed level since last November and recovering 30% of their decline. The biggest single source of orders was from other EZ countries, +17.5% m/m, indicating that something is stirring in the Eurozone outside Germany as well. In Asia time, Australia started the string of positive news with a better than expected employment report, +32,2K, vs. -18K expected, but AUD couldn't gain much because risk was "off" in Asia due to worries about liquidity in China. No matter. European stocks are up 1% and US futures are positive, so it's risk "on" and Euro+.

Why is dollar/yen stuck below 96? Evidently, Japanese investors were disappointed with yesterday's US non-manufacturing ISM and ADP employment reports, keeping them skeptical about US recovery outlook. Japanese investors remain neutral in their outbound fixed income investments and nonresidents net purchases of Japanese equities have accelerated, yen positive. USD-JPY failed to break over the 55-day moving average resistance near 95.50 last night and traded through the 200 day MA near 95.04. Higher US Treasury yields on refunding concerns should hold dollar/yen downside but these yields may not be high enough to trigger upside.

EM are stronger, virtually across the board. MXN has broken 13. Exceptions are CZK, weaker on a surprise rate cut, and ILS, all over the place as the Bank of Israel continues to keep traders on their toes.